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A firm has a ROE equal to the industry average but its price to book ratio is below the industry average.You know that the firm's _________.


A) earnings yield is above the industry average
B) P/E ratio is above the industry average
C) dividend payout ratio is too high
D) interest burden must be below the industry average

E) A) and D)
F) A) and B)

Correct Answer

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Use the following cash flow data of Haven Hardware for the year ended December 31, 2008. Use the following cash flow data of Haven Hardware for the year ended December 31, 2008. -What is the net cash provided by operating activities of Haven Hardware? A) ($30,000) B) $220,000 C) $320,000 D) $780,000 -What is the net cash provided by operating activities of Haven Hardware?


A) ($30,000)
B) $220,000
C) $320,000
D) $780,000

E) B) and C)
F) A) and C)

Correct Answer

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Many observers believe that firms "manage" their income statements to _______.


A) minimize taxes over time
B) maximize expenditures
C) smooth their earnings over time
D) generate level sales

E) B) and C)
F) A) and C)

Correct Answer

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The financial statements of Burnaby Mountain Trading Company are given below. The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the stock market for $27 each. -Refer to the financial statements of Burnaby Mountain Trading Company.The firm's quick ratio for 2008 is _________. A) 1.30 B) 1.50 C) 1.69 D) 2.83 Note: The common shares are trading in the stock market for $27 each. -Refer to the financial statements of Burnaby Mountain Trading Company.The firm's quick ratio for 2008 is _________.


A) 1.30
B) 1.50
C) 1.69
D) 2.83

E) B) and D)
F) C) and D)

Correct Answer

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Use the following cash flow data of Haven Hardware for the year ended December 31, 2008. Use the following cash flow data of Haven Hardware for the year ended December 31, 2008. -What is the cash at the end of 2008 for Haven Hardware? A) $6,000 B) $94,000 C) $736,000 D) $188,000 -What is the cash at the end of 2008 for Haven Hardware?


A) $6,000
B) $94,000
C) $736,000
D) $188,000

E) A) and D)
F) A) and C)

Correct Answer

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A high price to book ratio may indicate which one of the following?


A) The firm expanded its plant and equipment in the past few years.
B) The firm is doing a better job controlling its inventory expense than other related firms.
C) Investors may believe that this firm has opportunities of earnings a rate of return excess of the market capitalization rate.
D) The firm's P/E ratio is too high.

E) A) and D)
F) C) and D)

Correct Answer

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Which one of the following ratios is used to calculate the times interest earned ratio?


A) Net profit/Interest expense
B) Pretax profit/EBIT
C) EBIT/Sales
D) EBIT/Interest expense

E) A) and D)
F) C) and D)

Correct Answer

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The firms leverage ratio is 1.2,interest burden ratio is .81,profit margin is .24,and its asset turnover is 1.25.What is the firm's ROA?


A) .250
B) .300
C) .335
D) .372

E) A) and B)
F) C) and D)

Correct Answer

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Use the following cash flow data of Haven Hardware for the year ended December 31, 2008. Use the following cash flow data of Haven Hardware for the year ended December 31, 2008. -What is the net cash provided by or used in financing activities of Haven Hardware? A) ($10,000) B) ($120,000) C) $10,000 D) $120,000 -What is the net cash provided by or used in financing activities of Haven Hardware?


A) ($10,000)
B) ($120,000)
C) $10,000
D) $120,000

E) A) and C)
F) C) and D)

Correct Answer

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A firm has lower inventory turnover,a longer ACP,and a lower fixed-asset turnover than the industry averages.You should not be surprised to find that this firm has _____________. I.lower ATO than the industry average II.lower ROA than the industry average III.lower ROE than the industry average


A) I only
B) I and II only
C) II and III only
D) I, II and III

E) All of the above
F) B) and C)

Correct Answer

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Which of the following is not a ratio used in the DuPont analysis?


A) Interest burden
B) Profit margin
C) Asset turnover
D) Earnings yield ratio

E) B) and C)
F) All of the above

Correct Answer

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The tax burden of the firm is .4,the interest burden is 0.65,the return on sales is 0.05,the asset turnover is 0.90,and the leverage ratio is 1.35.What is the ROE of the firm?


A) 1.58%
B) 5.68%
C) 12.20%
D) 13.33%

E) C) and D)
F) None of the above

Correct Answer

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Which of the following statements is true concerning Economic Value Added?


A) A growing number of firms tie managers' compensation to EVA.
B) A profitable firm will always have a positive EVA.
C) EVA recognizes that the cost of capital is not a real cost.
D) If a firm has positive present value of growth opportunities it will have positive EVA.

E) A) and C)
F) C) and D)

Correct Answer

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The net income of the company is $120.Accounts payable increase by $20,depreciation is $15,and equipment is purchased for $40.If the firm issued $110 in new bonds,what is the total change in cash for the firm for all activities?


A) Increase of $225
B) Increase of $130
C) Decrease of $195
D) Decrease of $110

E) A) and B)
F) B) and D)

Correct Answer

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When assessing sustainability of a firm's cash flows,analysts will prefer to see cash growth generated from which of the following sources?


A) Cash flow from investment activities
B) Cash flow from operating activities
C) Cash flow from financing
D) Cash flow from extraordinary events

E) B) and C)
F) A) and D)

Correct Answer

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If a firm's ratio of (stockholders' equity/total assets) is lower than the industry average and its ratio of (long-term debt/stockholders' equity) is also lower than the industry average,this would suggest that the firm _________.


A) has more current liabilities than the industry average
B) has more leased assets than the industry average
C) will be less profitable than the industry average
D) has more current assets than the industry average

E) A) and C)
F) C) and D)

Correct Answer

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A firm has an ROA of 19%,a debt/equity ratio of 1.8,a tax rate of 30%,and the interest rate on its debt is 7%.Its ROE is _________.


A) 15.12%
B) 28.42%
C) 37.24%
D) 40.60%

E) B) and D)
F) A) and D)

Correct Answer

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Which of the following results in an increase in cash to the firm?


A) Dividends paid
B) A delay in collecting on accounts receivable
C) Net new investments
D) Increase in accounts payable

E) A) and B)
F) None of the above

Correct Answer

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The financial statements of Flathead Lake Manufacturing Company are given below: The financial statements of Flathead Lake Manufacturing Company are given below: Note: The common shares are trading in the stock market for $15 per share -Refer to the financial statements of Flathead Lake Manufacturing Company.The firm's current ratio for 2007 indicates that Flathead's liquidity has ________ since 2006. A) risen B) fallen C) stayed the same D) can't tell from the information given Note: The common shares are trading in the stock market for $15 per share -Refer to the financial statements of Flathead Lake Manufacturing Company.The firm's current ratio for 2007 indicates that Flathead's liquidity has ________ since 2006.


A) risen
B) fallen
C) stayed the same
D) can't tell from the information given

E) B) and D)
F) None of the above

Correct Answer

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Common size balance sheets are prepared by dividing all quantities by ____________.


A) total assets
B) total liabilities
C) shareholder's equity
D) fixed assets

E) C) and D)
F) All of the above

Correct Answer

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