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Fin STMT AN Final
| Question | Answer |
|---|---|
| Jones Company has long-term debt of $1,000,000, while Smith Company, Jones' competitor, has long-term debt of $200,000. Which of the following statements best represents an analysis of the long-term debt position of these two firms? | Not enough information to determine if any of the answers are correct. |
| CO had the foll fin statistics for 2012: Long-term debt (average rate of interest is 8%) $400,000 Interest expense 35,000 Net income 48,000 Income tax 46,000 Operating income 107,000 What is the times interest earned for 2012? | 3.7 times |
| A times interest earned ratio indicates that: preferred stock has no maturity date. the debt will never become due. the firm will be able to repay the principal when due. the principal can be refinanced. none of the answers are correct. | none of the answers are correct. |
| CO reports the follow capital structure: Current liabilities $100,000 Long-term debt 400,000 Deferred income taxes 10,000 Preferred stock 80,000 C/S 100,000 Premium on C/S 180,000 RE 170,000 What is the debt ratio? | 0.49 |
| The debt ratio indicates: | a comparison of liabilities with total assets. |
| CO had the follow B/S results for 2012 Current liabilities $12.6 Bonds payable 18.6 Lease obligations 2.7 Noncontrolling interest 1.4 Common stock 8.6 Retained earnings 22.9 $66.8 Compute the debt-equity ratio. | 112.1% |
| n computing debt to tangible net worth, which of the following is not subtracted in the denominator? Copyrights Goodwill Patents Investments Trademarks | Investments |
| A fixed charge coverage: | is an income statement indication of debt carrying ability. |
| The follow fin stmts data are taken Co 2012 annual report Current assets $12.6 Investments 9.4 Intangibles 6.8 PPE 58.1 Current liabilities 6.4 Long-term debt 39.7 Stockholders' equity 40.8 Compute the debt ratio. | 53.0% |
| The follow fin stmt data are taken from CO 2012 annual report Current assets $12.6 Investments 9.4 Intangibles 6.8 PPE 58.1 Current liabilities 6.4 Long-term debt 39.7 Equity 40.8 Compute the debt to tangible net worth ratio | 135.6% |
| If a firm has substantial capital or financing leases disclosed in the notes but not capitalized in the financial statements, then: | the debt ratio will be understated. |
| Under the Employee Retirement Income Security Act, a company can be liable for its pension plan up to: 30% of its total assets 30% of its net worth 40% of its total assets 40% of its net worth 50% of its total assets | 30 percent of its net worth |
| Included in the Employee Retirement Income Security Act are the following: | provisions requiring minimum funding of pension plans, minimum rights to employees upon termination of their employment, and creation of the Pension Benefit Guaranty Corporation. |
| the foll 1 is incorrect A ratio that indicates a firm's longterm, debtpaying ability from the I/S view is the X int earn Some of the items on the I/St that are exclud in order to compute X int earn R int ex, income tax & unusual/infreq items | Usually, the highest times interest coverage in the most recent five-year period is used as the primary indication of the interest coverage. |
| Which of these items represents a definite commitment to pay out funds in the future? Bonds payable Reserves for rebuilding furnaces Deferred taxes Noncontrolling shareholders' interests Redeemable preferred stock | Bonds payable |
| foll 1 stmt is not true relating to a capitalized (capital) lease A capital lease is handled as if the lessee bought the asset The leased asset is in the fixed assets and the related obligation is included in liab On the B/S, the capitalized a | On the balance sheet, the capitalized asset amount will usually be higher than the capitalized liability amount. |
| foll stmt is not true relating to a defined contribution pen plan A defined contrib plan defines the contributions of the co to the pen plan Once the defined contrib is paid, the co has no further obliga to the pen plan This type of plan shif | This type of plan presents substantial problems in estimating the pension liability. |
| A # of assumptions about future events must be made regarding a defined benefit plan. follow does not represent one of the assumptions? Interest rates Termination date for the firm Employee turnover Mortality rates Compensation | Termination date for the firm |
| Noncontrolling shareholders' interest in earnings of subsidiaries are included in earnings for the times interest earned coverage. | True |
| Capitalized interest should not be considered as part of interest in the times interest earned computation. | False |
| Net profit margin measures return on: sales. owners' equity. productive assets. total assets. inventory. | sales. |
| Total asset turnover measures the ability of a firm to: generate profits on sales. generate sales through the use of assets. buy new assets. move inventory. cover long-term debt. | generate sales through the use of assets. |
| Return on assets cannot fall under which of the following circumstances? Net Profit Margin Total Asset Turnover I. decline rise II. rise decline III. rise rise IV. decline decline | III. rise rise |
| A reason that equity earnings create a problem in analyzing profitability is that equity earnings are: usually greater than the related cash flow less than dividends declared more than dividends declared extraordinary nonrecurring | usually greater than the related cash flow. |
| In the an of profitability, if E/E are substantial, it is advisable to consider them as extraordinary consider them as nonrecurring investigate the earning power of the parent outside of the related inves act recompute the debt ratio and X | investigate the earning power of the parent outside of the related investing activities. |
| Which of the following is not a type of operating asset? Inventory Cash Land Long-term investments Equipment | Long-term investments |
| follow circumstances will cause sales to fixed assets to be abnormally high? -A recent purchase of land -A labor-intensive industry -A highly mechanized facility -High direct labor costs from a new union contract -The use of units-of-production | A labor-intensive industry. |
| Which of the following ratios will usually have the lowest percent? Return on investment Return on total equity Return on common equity Return on total assets There is not enough information to tell | Return on total assets |
| Which suppliers of funds bear the greatest risk and should therefore earn the greatest return? Bondholders Suppliers General creditors such as banks Preferred shareholders Common shareholders | Common shareholders |
| Gross profit margin is an important ratio of merchandising firms b/c their invest in real property are high COGS is usually the largest ex selling ex like advertising are usually high it measures their ability to collect rec it measures | cost of goods sold is usually the largest expense. |
| Income tax expense in interim reporting should: be based on the quarterly income only. contain a judgment estimation of the annual effective tax rate. be based on the income year-to-date. exclude extraordinary items in earlier quarters of t | contain a judgment estimation of the annual effective tax rate. |
| Noncontrol int share of earn is the total earn of unconsolidated sub earn based on the % of holdings by parent co of unconsolidated sub the total earn of consolidated subsidiaries earnings based on the % of holdings by outside owners of cons | earnings based on the percent of holdings by outside owners of consolidated subsidiaries |
| Which of the following would most likely cause a rise in net profit margin? Increased sales Decreased preferred dividends Increased cost of sales Decreased operating expenses Decreased earnings per share | Decreased operating expenses |
| follow could cause return on assets to decline when net profit margin is increasing Sale of investments at yr end Increased turnover of operating assets Decline in book value A stock split Purchase of a new building at yr end | Purchase of a new building at year-end |
| DuPont analysis? | Return on assets = net profit margin times total asset turnover |
| Operating assets equals: cash, accounts receivable, and equipment. current assets plus tangible assets. total assets minus intangible assets. only long-term assets. only current assets. | current assets plus tangible assets. |
| Return on investment measures: return to all suppliers of funds. return to all long-term creditors. return to all long-term suppliers of funds. return to stockholders. return to all short-term suppliers of funds. | return to all long-term suppliers of funds. |
| In the formula for return on investment, interest expense is multiplied by (1 - tax rate). Why is this adjustment made? Int is not tax deductible Debt is excl from the denominator N/I in the formula is after tax Divs are not deductible for | Net income in the formula is after tax |
| The operating ratios may give significantly different results from net earnings ratios if a firm has large amounts of nonoperating assets generating income. | True |
| Return on investment measures the return on long-term suppliers of funds. | True |
| The ratio percentage of earnings retained is the same as that termed: dividend yield. dividend payout. this year's retained earnings to net income. return on common equity. book value. | this year's retained earnings to net income. |
| The earnings per share is computed for: common stock. non-redeemable preferred. redeemable preferred. common stock and non-redeemable preferred stock. common stock and fully diluted preferred stock. | common stock. |
| In 2012 Co reported EPS of $2 for 10,000 shares. In 2013, there was a 2for1 stock split for which 2013 EPS were reported @$2.10 The EPS presentation for a 2-yr compar an would be 2013 2012 I. $2.10 $2.00 II. $1.05 $2.00 III. $1.05 $2.0 | IV. $2.10 $1.00 |
| Interest expense creates magnification of earnings through financial leverage because: | while earnings available to pay interest rise, earnings to residual owners rise faster. |
| What is the effect of the exercise of stock options? | They increase the number of shares outstanding. |
| Dawn Alive reported the following for 2012. Ending market price $40.75 Earnings per share: Basic 2.50 Diluted 2.08 Dividends per share 1.10 The price/earnings ratio and dividend payout were: | 19.59 and 52.88% |
| The best dividend payout ratio: approximates 50%. continues at the same level as was historically paid. is similar to the industry average. is higher than that of competitors. does not follow any rule of thumb for dividend payout. | does not follow any rule of thumb for dividend payout. |
| The following data were gathered from the annual report of Desk Products. Market price per share $ 30.00 Number of common shares 10,000 Preferred stock, 5% $100 par $ 10,000 Common equity $140,000 The book value per share is: | 14 |
| foll is not a reason to interpret book value w/ caution Land may be worth more than it cost Deprec assets may be held Invest may be worth more than their purchase price Patents may have a high market value All of the answers are correct | All of the answers are correct. |
| foll is not a true stmt regarding stock options may cause dilution of EPS allow the purchase of C/S @ favorable terms involve a compensation ex Exercise improves the shortterm liquid & debt position of the issuing firm -The potential dilutio | The potential dilution can be disregarded in financial analysis |
| Using fin leverage is a good fin strategy from the viewpoint of stockholders of companies having: a high debt ratio. cyclical highs and lows. steady or rising profits. a steadily declining current ratio. none of the answers are correct. | steady or rising profits. |
| A firm has a degree of fin leverage of 1.20. If EBIT increase by 20%, then net income: will not necessarily change. will increase by 20%. will decrease by 24%. will decrease by 20%. None of the answers are correct. | None of the answers are correct. |
| The price/earnings ratio: measures the past earning ability of the firm. is a gauge of future earning power as seen by investors. relates price to dividends. relates price to total net income. All of the answers are correct. | is a gauge of future earning power as seen by investors. |
| Stable dividend policy would most commonly imply: a high price/earnings ratio. a stable dividend yield. stable dividends per share. stable earnings per share. increasing dividends per share. | stable dividends per share. |
| Book value per share may not approximate market value per share because: | book value is related to book figures and market value is related to the future potential as seen by investors. |
| Which of the following ratios represents dividends per common share in relation to market price per common share? Dividend payout Dividend yield Price/earnings Book value per share Percentage of earnings retained | Dividend yield |
| Which of the following ratios usually reflects investors opinions of the future prospects for the firm? Dividend yield Book value per share Price/earnings ratio Earnings per share Dividend payout | Price/earnings ratio |
| COreported the foll N 2012 Begin market price $20.00 Avg market price 24.00 End market price 26.00 EPS Basic 1.80 Diluted 1.60 Cash dividends per share 1.00 The price earnings ratio and dividend payout were: | 16.25 and 62.50%. |
| The degree of financial leverage is the multiplication factor by which debt to equity changes as new debt is issued. | False |
| A firm might have a low dividend payout ratio if it were planning a major expansion. | True |
| follow is not a purpose of the stmt of cash flows? To show cash flow from operations To show cash flow from fin activities To show cash flow from inves activities To show all inves & fin transactions To show operating ex for a period of | To show operating expenses for a period of time |
| follow is not a typical cash flow under operating activities? Cash inflows from sale of goods or services Cash inflows from int Cash outflows to employees Cash outflows to suppliers Cash inflows from sale of PPE | Cash inflows from sale of property, plant, and equipment |
| Follow is not a typical cash flow under inves act Cash inflow from receipt of loans Cash inflow from sale of prPPE Cash outflow for payment of amounts borrowed Cash outflow for loans to other entities Cash outflow for purchase of PPE | Cash outflow for payment of amounts borrowed |
| Follow is not a typical cash flow under fin act Cash inflow from sale of equity securities Cash inflow from sale of bonds Cash outflow for pmt of divs Cash outflow for loans to other entities Cash outflow for pmt of amounts borrowed | Cash outflow for loans to other entities |
| Working capital is defined as: total assets less intangible assets. current assets divided by current liabilities. current assets less current liabilities. total assets less current assets. current assets less liabilities. | current assets less current liabilities. |
| Amort of patents can be + to income in the operations section of the stmt of cash flows b/c it is not a tax deductible ex it results in an incr in income it does not require the outlay of cash patent amort is not an ex it represents an | it does not require the outlay of cash. |
| follow is not an item added back to income in the operations section of the stmt of cash flows when using the indirect presentation? Depre Amort of goodwill Increase in deferred income taxes Amort of bond premium Amort of patents | Amortization of bond premium |
| Follow transactions is not reflected in a statement of cash flows? Sale of treasury stock Declaration of a stock dividend Purchase of foreign subsidiary with cash Issuance of convertible bonds Purchase of equipment with cash | Declaration of a stock dividend |
| Management should not use the stmt of cash flows for which of the follow purposes? determine div policy determine cash flow from operations determine cash flow from inves act determine cash flow from fin act determine the bal in A/R | To determine the balance in accounts receivable |
| Tim Company had sales of $30,000, increase in accounts payable of $5,000, decrease in accounts receivable of $1,000, increase in inventories of $4,000, and depreciation expense of $4,000. What was the cash collected from customers? | $31,000 |
| Conroy Company had sales of $50,000, increase in accounts payable of $4,000, decrease in accounts receivable of $3,000, tax expense of $5,000, and an increase in taxes payable of $1,000. What was the cash outflow for taxes? | $4,000 |
| Francis Company had operating expenses of $20,000 and depreciation expenses of $4,000. Assuming no other transactions, what was the cash paid for operating expenses? | $16,000 |
| In a stmt of cash flows (indirect method), depre ex should be presented as: a cash flow from financing activities. a cash flow from investing activities. a deduction from net income. an addition to net income. a financial activity. | an addition to net income. |
| The statement of cash flows became a required statement in which year? 1995 1978 1971 1987 1993 | 1987 |
| follow should not be considered as part of "cash and cash equivalents"? Cash on hand Cash on deposit Highly liquid investments Investments in short-term securities (<90 day maturity) Cash restricted for retirement of bonds | Cash restricted for retirement of bonds |
| Which of the following accounts will not be considered when computing cash flow from operations? Accounts receivable Inventories Equipment Accounts payable Taxes payable | Equipment |
| Which of the following accounts is not part of working capital? Cash Accounts receivable Inventory Accounts payable Investments | Investments |
| Which of the following is the focus for the statement of cash flows? Cash Cash and cash equivalents Current assets Working capital None of the answers are correct. | Cash and cash equivalents |
| The statement of cash flows is presented on a working capital basis. | False |
| The income statement does not fairly represent the cash from operations. | True |
| Which of the following ratios is given the highest significance rating by commercial loan officers? Inventory Turnover In Days Degree of Financial Leverage Times Interest Earned Fixed Charge Coverage Debt/Equity | Debt/Equity |
| Which financial ratio appears most frequently in loan agreements according to commercial loan officers? Quick Ratio Cash Flow/Total Debt Debt/Equity Times Interest Earned Cash ratio | Debt/Equity |
| Which of the following ratios is given the highest significance rating by controllers? Current Ratio Earning Per Share Return on Equity - After Tax Return on Assets - After Tax Price/Earnings Ratio | Earning Per Share |
| Which of the following ratios appears most frequently in annual reports? Earnings per Share Return on Equity Profit Margin Effective Tax Rate Debt/Equity | Earnings per Share |
| Which of the following ratios is given the highest significance rating by Certified Public Accountants? Quick Ratio Debt/Equity Net Profit Margin Current Ratio Times Interest Earned | Current Ratio |
| follow ratios is rated to be a primary measure of liquidity & the highest significance rating of the liquid ratios accord to commercial loan departs? Debt/Equity Current Ratio Degree of Fin Leverage Inven Turnover in Days A/R Turnover i | Current Ratio |
| Which of the following ratios is a primary measure of liquidity according to the corporate controller survey? Earnings per Share Debt/Equity Ratio Return on Equity after Tax Current Ratio None of the answers are correct | Current Ratio |
| follow depremethods is considered to be the least conservative? Sum-of-the-Years' Digits Declining-Balance Method Straight-Line each method is equally conservative Sum-of-the-Years' Digits and Declining-Bal Method are = conservative | Straight-Line |
| There are many defs or des given to fin failure follow doesn't appear to be a reasonable def or des refin of bonds pay liquidation defer of pmts to short-term creditors defer of pmts of interest on bonds defer of pmts of prin on bonds | refinancing of bonds payable. |
| Edward I. Altman developed a multivariate model to predict bankruptcy. The model produces an overall discriminant score called a Z value. Which of the following statements is probably an unreasonable statement relating to the Z value? | A Z score of 2.00 or below indicates a very healthy company. |
| Follow smts is not true? A review of fin stmts includ the notes will indicate how conserv the stmt R N regard to acct policies Acct policies that result in the slowest report of income are the most conserv When a firm has conservacct policies | Conservative accounting policies always result in the lowest reported income for any given period of time. |
| CO indicated the follow ratios to be the best for forecasting financial failure: cash flow/total debt. net income/total assets. total debt/total assets. cash flow/total debt and net income/total assets. all of the answers are correct. | all of the answers are correct. |
| follow is not a reasonable matching? I. inventory LIFO II. fixed assets accelerated depre III. intangible assets short period of time for amort IV. pensions short period of time to amortize prior service cost V. receivables direct write-off method | receivables direct write-off method |
| follow variables indicates a measure of cumulative profit over time? R/E (B/S)/total assets Earnings before interest and taxes/total assets Working capital/total assets Market value of equity/book value of total debt Sales/total assets | Retained earnings (balance sheet)/total assets |
| Which of the following is not a multiple approach to valuation? Discounted cash flow Price-to-earnings (PE) Price-to-book Price-to-operating cash flow Price-to-sales | Discounted cash flow |
| Which of the following is not a discounted cash flow model for valuation? Free cash flow Dividend discount model Discounted cash flow Discounted abnormal earnings All of the answers are discounted cash flow models. | Discounted abnormal earnings |
| Tom,Tim& Jack on their book Val, Measur&Manag Val of Co observed that buyer paid 2 much for CO b/c of all but 1 of follow market potential > thanEST overoptimis appraisal of market overEST of synergies poor due diligence overbiding | market potential greater than estimated. |
| In general, controllers rate profitability ratios to have a higher significance than debt ratios. | True |
| Accounting policies that result in the fastest reporting of income are the most conservative. | False |
| With the Altman model, the higher the Z score, the more likely the firm will go bankrupt. | False |
| Which of the following ratios can be used as a guide to a firm’s ability to carry debt from an income perspective? 1. Debt ratio 2. Debt to tangible net worth 3. Debt/equity 4. Times interest earned 5. Current ratio | Times interest earned |
| There is disagreement on all but which of the following items as to whether it should be considered a liability in the debt ratio? 1. Short-term liabilities 2. Reserve accounts 3. Deferred taxes 4. Noncontrolling income (loss) 5. Preferred stock | Preferred stock |
| A firm may have substantial liabilities that are not disclosed on the face of the balance sheet from all but which of the following? 1. Leases 2. Pension plans 3. Joint ventures 4. Contingencies 5. Bonds payable | Bonds payable |
| In computing the debt ratio, which of the following is subtracted in the denominator? 1. Copyrights 2. Trademarks 3. Patents 4. Marketable securities 5. None of the above. | None of the above. |
| All but which of these ratios are considered to be debt ratios? 1. Times interest earned 2. Debt ratio 3. Debt/equity 4. Fixed charge ratio 5. Current ratio | Current ratio |
| follow stmts is false? The debt to tangible net worth ratio is more conser than the debt ratio The debt to tangible net worth ratio is more conserv than the debt/equity Times int earn indicates an I/S view of debt The debt/equity ratio indicates an | The debt/equity ratio indicates an income statement view of debt. |
| Sneider Company has long-term debt of $500,000, while Abbott Company has longterm debt of $50,000. Which of the following statements best represents an anal of the long-term debt position of these 2 firms? S Co times int earn should be < than A Co A | None of the above. |
| A times int earn ratio of 0.20 to 1 means That the firm will default on its int pmt That N/I is < than the int ex (including cap i int) That cash flow exceeds the net income That the firm should reduce its debt None of the above | 2. That net income is less than the interest expense (including capitalized interest). |
| In computing debt to tangible net worth, which of the following is not subtracted in the denominator? 1. Patents 2. Goodwill 3. Land 4. Bonds payable 5. Both 3 and 4 | 5. Both 3 and 4 |
| The ratio fixed charge cov Is a cash flow indication of debt-pay ability Is an income statement indication of debt-paying ability Is a B/S indication of debt-paying ability Will usually be higher than the times int earn ratio None of the above | Is an income statement indication of debt-paying ability. |
| Under the Employee Retirement Income Security Act, a company can be liable for its pension plan up to 1. 30% of its net worth. 2. 30% of pension liabilities. 3. 30% of liabilities. 4. 40% of its net worth. 5. None of the above. | 30% of its net worth. |
| Which of the following statements is correct? | Capitalized interest should be included with interest expense when computing times interest earned. |
| Which of these items does not represent a definite commitment to pay out funds in the future? 1. Notes payable 2. Bonds payable 3. Noncontrolling interests 4. Wages payable 5. None of the above. | None of the above |
| Which of the following is not considered to be a nonrecurring item? 1. Discontinued operations 2. Extraordinary items 3. Cumulative effect of change in accounting principle 4. Interest expense 5. None of the above. | Interest expense |
| Ideally, which of these ratios will indicate the highest return for an individual firm? 1. Return on assets 2. Return on assets variation 3. Return on investments 4. Return on total equity 5. Return on common equity | . Return on common equity |
| If a CO gross profit has < causes could B The cost of buying inven has > more than sell price Sell price have < due to competition Sell price have > due to competition mix of goods has changed to include more products w/ <margins Theft is occur | Selling prices have increased due to competition. |
| Gross profit anal could be of value for all but Project of profit Est admin ex Inven for interim stmts Est inven for insur claim annual basis Replacing the physical taking of inven on an annual basis 1. Projections of profitability 2 | Replacing the physical taking of inventory on an annual basis |
| Total asset turnover measures N/I $ generated by each $ of sales The ability of the firm to gen sales through the use of the assets The firm’s ability to make productive use of its PPE through gen of profits The relationship between the income earn | The ability of the firm to generate sales through the use of the assets. |
| Equity earn can represent a prob in analy profit b/c Equity earnings may not be related to cash flow Equity earnings are extraordinary Equity earnings are unusual Equity earnings are not from oper Equity earnings are equal to dividends received | Equity earnings are not from operations. |
| Which of the following is not a type of operating asset? 1. Intangibles 2. Receivables 3. Land 4. Inventory 5. Building | Intangibles |
| Earnings based on percent of holdings by outside owners of consolidated subsidiaries are termed Equity earnings Earnings of sub Investment income Noncontrolling int None | Noncontrolling interest. |
| Net profit margin × total asset turnover measures 1. DuPont return on assets. 2. Return on investment. 3. Return on stockholders’ equity. 4. Return on common equity. 5. None of the above. | DuPont return on assets. |
| Return on assets cannot rise under which of the following circumstances? Net profit margin Total asset turnover 1. Decline Rise 2. Rise Decline 3. Rise Rise 4. Decline Decline 5. The ratio could rise under all of the above. | Rise Rise |
| A reason that equity earn create a prob in anal profit is B/C Equity earn R nonrecurring Equity earn are extraordinary Equity earnings are usually less than the related cash flow Equity earnings relate to operations None of the above | Equity earnings are usually less than the related cash flow. |
| follow ratios will usually have the highest percent? 1. Return on investment 2. Return on total equity 3. Return on common equity 4. Return on total assets 5. There is not enough information to tell. | Return on total equity |
| Which of the following ratios will usually have the lowest percent? 1. Return on investment 2. Return on total equity 3. Return on common equity 4. Return on total assets 5. There is not enough information to tell. | Return on total assets |
| follow items will be reported on the income statement as part of net income? 1. Prior period adjustment 2. Unrealized decline in market value of investments 3. Foreign currency translation 4. Gain from selling land 5. None of the above. | Gain from selling land |
| Noncont int in earn is The total earn of unconsolidated sub Earn based on the % of holdings by the parent of unconsolidated sub Total earn of unconsolidated subs Earni based on the % of holdings by outside owners of unconsol sub None | Earnings based on the percent of holdings by outside owners of unconsolidated subsidiaries |
| Which of the following could cause return on assets to decline when net profit margin is increasing? 1. Purchase of land at year-end 2. Increase in book value 3. A stock dividend 4. Increased turnover of operating assets 5. None of the above. | Purchase of land at year-end |
| In 2009 and 2010 Co reported EPS of .8 & 1 n 2011 CO declared a 4F1 stock split 4 the yr 2011 CO reported EPS of .3 The appropriate EPS presentation for a three-year comparative analysis that includes 2009, 2010, and 2011 would be 2011 2010 2009 | $0.30 $0.25 $0.20 |
| The degree of financial leverage for Zorro Company was 1.50 when EBIT was reported at $1,000,000. If EBIT goes to $2,000,000, the accompanying change in net income will be | $1,500,000. |
| In 2012, Zello Company declared a 10% stock dividend. In 2011, earnings per share was $1.00. When the 2011 earnings per share is disclosed in the 2012 annual report, it will be disclosed at | $0.91. |
| Which of the following ratios usually reflects investors’ opinions of the future prospects for the firm? 1. Dividend yield 2. Book value per share 3. Price/earnings ratio 4. Earnings per share 5. Dividend payout | Price/earnings ratio |
| . Which of the following ratios gives a perspective on risk in the capital structure? 1. Book value per share 2. Dividend yield 3. Dividend payout 4. Degree of financial leverage 5. Price/earnings ratio | Degree of financial leverage |
| The earnings per share ratio is computed for 1. Convertible bonds. 2. Redeemable preferred stock. 3. Common stock. 4. Nonredeemable preferred stock. 5. None of the above. | Common stock. |
| Increasing fin leverage can be a risky strategy from the viewpoint of stockholders of companies having Steady and high profits Low & falling profits Relatively high &increasing profits Low debt/equity ratio and relatively high profits None | Low and falling profits |
| A firm has a degree of financial leverage of 1.3. If earnings before interest and tax increase by 10%, then net income 1. Will increase by 13.0%. 2. Will increase by 13. 3. Will decrease by 13.0%. 4. Will decrease by 13. 5. None of the above. | Will increase by 13.0%. |
| The ratio that represents dividends per common share in relation to market price per common share is 1. Dividend payout. 2. Dividend yield. 3. Price/earnings. 4. Book value per share. 5. Percentage of earnings retained. | Dividend yield. |
| Book value per share may not approx market value per share B/C Invests may have a market value above the orig cost Land may have increasein value Market value reflects future earning power firm owns patents that have subs value All of the above | All of the above. |
| Which of the following could lead to cash flow problems? 1. Tightening of credit by suppliers. 2. Easing of credit by suppliers. 3. Reduction of inventory. 4. Improved quality of accounts receivable. 5. Selling of bonds. | Tightening of credit by suppliers |
| follow would'nt contribute to bankruptcy of a profitable firm Substantial increase in inventory Substantial increase in receivables Substantial decrease in accounts payable Substantial decrease in notes payable Substantial decrease in receivables | Substantial increase in receivables. |
| follow current asset or current liability accounts is not included in the computation of cash flows from operating activities? Change in A/R Change in inven Change in accounts pay. Change in accrued wages Change in notes pay. to banks | Change in notes payable to banks. |
| follow items is not included in the adjustment of N/I to cash flows from operating activities? Increase in deferred taxes Amort of goodwill Depre exp for the period Amortization of premium on bonds payable Proceeds from selling land | Proceeds from selling land. |
| Which of the following represents an internal source of cash? Cash inflows from financing activities Cash inflows from investing activities Cash inflows from selling land Cash inflows from operating activities Cash inflows from issuing stock | Cash inflows from operating activities |
| How would revenue from services be classified? 1. Investing inflow 2. Investing outflow 3. Operating inflow 4. Operating outflow 5. Financing outflow | . Operating inflow |
| What type of account is inventory? 1. Investing 2. Financing 3. Operating 4. Noncash 5. Sometimes operating and sometimes investing. | Operating |
| How would short-term investments in marketable securities be classified? 1. Operating activities 2. Financing activities 3. Investing activities 4. Noncash activities 5. Cash and cash equivalents | Cash and cash equivalents |
| following is not a typical cash flow under operating activities? Cash inflows from sale of goods or services Cash inflows from interest Cash outflows to employees Cash outflows to suppliers Cash inflows from sale of property, plant, and equipment | Cash inflows from sale of property, plant, and equipment |
| A transaction that will increase working capital is 1. Purchase of marketable securities. 2. Payment of accounts payable. 3. Collection of accounts receivable. 4. Sale of common stock. 5. None of the above. | Sale of common stock |
| Working capital is defined as Current assets less current liabilities Cash equivalent accounts less current liabilities Current assets less notes payable Total assets less current liabilities Current assets less cash equivalent accounts | Current assets less current liabilities |
| . Management should use the statement of cash flows for which of the following purposes? Determine the financial position Determine cash flow from investing activities Determine the balance in A/P Determine the balance in aA/R None | Determine the financial position |
| The purchase of land by the issuance of bonds pay should be in STMT of cash flows in which of the sec: Cash flows from operating act Supplemental schedule of noncash investing and fin act Cash flows from invest act Cash flows from fin act None | Supplemental schedule of noncash investing and financing activities |
| Notes to financial statements are beneficial in meeting the disclosure requirements of financial reporting. The notes should not be used to | Correct an improper presentation in the financial statements. |
| following would be a source of funds under a cash concept of funds but would not be listed as a source under the working capital concept? Sale of stock Sale of treasury stock Collection of A/R Proceeds from long-term bank borrowing | Proceeds from long-term bank borrowing |
| The concept of conservatism is often considered important in accounting. application of this concept means that in the event some doubt occurs as to how a transaction should be recorded, it should be recorded so as to | Understate income and understate assets |
| Early in a period in which sales were increasing at a modest rate and plant expansion and start-up costs were occurring at a rapid rate, a successful business would likely experience | Decreased profits and increased financing requirements because of an increasing cash shortage. |
| following ratios would best disclose effective management of working capital by a given firm relative to other firms in the same industry? | A high rate of financial leverage relative to the industry average. |
| If business conditions are stable, a decline in the number of days’ sales outstanding from one year to the next (based on a company’s accounts receivable at year-end) might indicate | A stiffening of the company’s credit policies. |
| Trading on equity (financial leverage) is likely to be a good financial strategy for stockholders of companies having | Steady amounts of reported earnings. |
| The ratio of total cash, trade receivables, and marketable securities to current liabilities is | The acid-test ratio |
| The times interest earned ratio is a primary measure of | Long-term debt-paying ability |
| The calculation of the number of times bond interest is earned involves dividing | Net income by annual bond interest expense |
| Which of the following would not be an example of the use of a multiple when valuing common equity? | Multiperiod discounted earnings models |
| The two most popular discounted earnings models appear to be | Discounted abnormal earnings and residual income |
| Shareholders of acquired companies are often big winners, receiving on average a premium of what in a friendly merger? | 20% |
| Which of the following was not given as a reason for acquirers paying too much in an acquisition? 1. Overuse of conventional financial statements 2. Overbidding 3. Overoptimistic appraisal of market potential 4. Overestimation of synergies | Overuse of conventional financial statements |
| Which of the following would likely be very useful when valuing a dot.com? 1. Discounted cash flow 2. Price-earnings 3. Net asset value 4. Dividend yield | Discounted cash flow |
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tiffany17ann