(Doc) Chapter 3-Evaluation of Financial Performance Multiple Choice - Sandy Brown - Academia - Edu

12/23/2019 (DOC) Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE MULTIPLE CHOICE | Sandy Brown - Academia.
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Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE

LO G I N M… S I G N U P  D O W N LO A
DOC
Chapter 3—EVALUATION OF
FINANCIAL PERFORMANCE
MULTIPLE CHOICE
Sandy Brown
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12/23/2019 (DOC) Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE MULTIPLE CHOICE | Sandy Brown - Academia.edu
Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A
A FLYING START
TO YOUR CAREER
GET A GLOBAL START NOW
ACCOUNTANCY QUALIFICATION.
A FLYING START
TO YOUR CAREER

d. debt to equity
AN! , #$! 1 %"&! $'#(! )act NA$! *eflective thinking
+%,! nowledge of financial analysis and cash flows $%#! )i8ed charge coverage ratio
31. f a firm4s current ratio is 1.65

a. its current liabilities e8ceed its current assets
b. it is possible for its quick ratio to be /.>
c. it is possible for its quick ratio to be 1.>
d. its current assets equal its current liabilities

+%,! nowledge of financial analysis and cash flowsH finance applications in spreadsheets
$%#! +iquidity ratios
3/. f a firm4s total asset turnover ratio is /.>5

a. its annual sales are less than its total assets
b.
c. it
itsistotal
possible
assetsthat
areits
twofi8ed asset
times turnoversales
its annual ratio is 1.6
d. its annual sales are two times its total assets
AN! 0 #$! 1 %"&! $'#(! )act NA$! *eflective thinking

$%#! $otal asset turnover ratio
3. f a firm4s return on investment5 i.e.5 earnings after ta8es divided by total assets5 is :I5 and the firm has
no preferred stock financing5 it is
a. possible that its return on stockholders4 equity is 1>I.
b. possible that its return on stockholders4 equity is 6I.
c. not possible for its debt-to-equity ratio to be 1.>.
d. not possible for its net profit margin to be :I.
AN! A #$! 1 %"&! $'#(! )act NA$! Analytic skills
$%#! *eturn on investment ratio
33. f a firm4s price to earnings D#F(E ratio is 1>5

a. it is not possible for it to be paying dividends also
b. its market to book ratio has to be at least /.>
c. its net profit margin is positive
d. its return on stockholders4 equity is negative

$%#! #rice to earnings ratio
36. $he analysis of the financial performance and condition of a firm with si<able international operations
is generally more complicated than analy<ing a firm whose operations are largely domestic for all of
the following reasons e8cept!
a. problems with the translation of foreign operating results
b. problems with definition of capital
c. fluctuating e8change rates
d. all of the above are correct reasons
AN! " #$! 1 %"&! $'#(! )act NA$! *eflective thinking
+%,! Jnderstand derivative markets $%#! nt4l issues! )inancial analysis of multinational...
37. $he work of the e8ternal independent auditor includes a letter that states that the financial information
represents fairly the financial position of the company and that these statements were!
a. an accurate picture of the company4s market position
b. based on the company4s accounting information system DAE
c. constructed in conformity with generally accepted accounting principles
d. developed using management4s choice of accounting enhancement techniques
AN! , #$! 1 %"&! $'#(! )act

NA$! (thical understanding and reasoning
+%,! Jnderstand the role of the finance function
$%#! (thical issues! Accuracy of financial statements
3:. $he arket Kalue Added DKAE is the 2222222.

a. indicator of how successful a firm has been at increasing its financing its assets
b. return on total capital minus cost of capital
c. indication of an increase in operating efficiency
d. positively related to the present value of all e8pected future (KA.

+%,! Jnderstand the role of the finance function
$%#! $he market value added concept
3;. (conomic value added D(KAE is a measure of operating performance that indicates how successful a
firm has been at!
a. increasing the growth in earnings
b. increasing the KA of the enterprise in any given year
c. increasing the rate of return on investment
d. all of the above
AN! "
+%,! Jnderstand the#$!
role of1the finance function
%"&! $'#(! )act NA$! (conomic
$%#! *eflective value
thinking
added
3=. )irms with a positive economic value added D(KAE!

a. have increasing growth in earnings
b. have an increasing rate of return on investment
c. have a return on capital greater than their cost of capital
d. have a high return on book value
+%,! Jnderstand the role of the finance function $%#! (conomic value added
6>. 0eferred ta8es may occur due to the use of

a. different ta8 schedules
b. different depreciation methods for ta8es and financial reporting
c. long-term equipment
d. different cash flow methods

+%,! Jnderstand the role of the finance function $%#! 0eferred ta8es
61. $he 22222 ratio indicates the percentage of a firm4s earnings that are distributed as dividends.
a. dividend yield
b. payout
c. return on earnings
A FLYING START
TO YOUR CAREER

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…
 D O W N LO A

d. earnings

+%,! nowledge of financial analysis and cash flows $%#! #ayout ratio
6/. )irms with 22222 growth rates would be e8pected to have 22222 payout ratios.
a. high5 low
b. high5 high
c. low5 low
d. low5 high
AN! A #$! 1 %"&! $'#(! )act NA$! *eflective thinking

+%,! Jnderstand the role of the finance function $%#! #ayout ratio
6. tocks with 22222 dividend yield often indicate 22222 e8pected future growth.
a. high5 high
b. low5 low
c. low5 high
d. high5 low

+%,! Jnderstand the role of the finance function $%#! 0ividend 'ield
63. $o increase the return on stockholders4 equity5 management could increase the 22222.
a. current ratio
b. price-to-earnings ratio
c. dividend yield
d. equity multiplier

+%,! Jnderstand the role of the finance function $%#! Analy<ing profitability
66. Although ratios can provide valuable information5 they can also be misleading for the following
reasonDsE!
a. ratios are only as reliable as the accounting data on which they are based.
b. compilation of industry norms often do not report information about the distribution of
values.
c. comparative analysis depends on the availability of data for appropriately defined
industries.
d. all of the above are correct.

+%,! nowledge of financial analysis and cash flows
$%#! A word of caution about financial ratio analysis
67. A component of earnings that recogni<es the return that the firm is e8pected to earn on assets that have
not been placed in services is called 22222.
a. earnings allowance
b. allowance for funds used during construction
c. capital budgeted
d. budgeted earnings
+%,! nowledge of financial analysis and cash flows $%#! (arnings quality
6:. ,ompanies can avoid paying income ta8es on inventory profits by using the 22222 inventory valuation
method.
a. +)%
b. ))%
c. #riced out
Chapter 3—EVALUATION
d. #riced in OF FINANCIAL PERFORMANCE M…  D O W N LO A
AN! A #$! 1 %"&! $'#(! )act NA$! *eflective thinking
+%,! nowledge of financial analysis and cash flows
$%#! nflation and financial statement analysis
6;. Nuking nats #est ervice5 nc. has a debt ratio of 6>I and an equity multiplier of /. What is Nuking
nats4 stockholders4 equity if total debt is L1>>5>>>?
a. L1>>5>>>
b. L16>5>>>
c. L/>>5>>>
d. L6>5>>>
AN! A
olution!
0ebtF$.A M >.6H $.A M L1>>5>>>F>.6 M L/>>5>>>
(quity M $.A - 0ebt M L/>>5>>> - L1>>5>>> M L1>>5>>>
#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

$%#! *atio manipulation
6=. iven the following information5 calculate the inventory for "ig how Kideos! 9uick ratio M 1./H
,urrent assets M L1/5>>>H ,urrent ratio M /.6
a. L35;>>
b. L75/3>
c. L:5/>>
d. L6577>
AN! "
olution!
,.+. M L1/5>>>F/.6 M L35;>>
nv M L1/5>>> - 1./DL35;>>E M L75/3>

7>. a.
A firm
>./6with an equity multiplier of 3.>5 will have a debt ratio of
b. 1.>>
c. >.:6
d. 3.>>
AN! ,
olution!
$.AF(quity M 35 so $.A M D3E(quity
0ebt M $.A - (quity M 3( - ( M (
$.0.F$.A M (F3( M >.:6

71. A firm with a debt ratio of >.:65 will have an equity multiplier of
a. >./6
b. 1.>>
c. >.:6
d 3 >>
d. 3.>>
AN! 0
Chapter 3—EVALUATION
olution! OF FINANCIAL PERFORMANCE M…
$.0F$.A M >.:65 so $.0 M >.:6 $.A.
 D O W N LO A
(quity M $.A - $.0 M $.A - >.:6 $.A M >./6 $.A

(quity multiplier. M $.A.F>./6 $.A. M 3

7/. What is the market price of a share of stock for a firm that pays dividends of L1./> per share5 has a #F(
of 135 and a dividend payout ratio of >.3?
a. L17.;>
b. L3/
c. L
d. L/;
AN! "
olution!
(# M 0#Fpayout M L1./>F>.3 M L.>
#rice M #F( D(#E M 13DLE M L3/

7. What is the return on investment for a firm that has a debt ratio of >.765 a net profit margin of 7.6I5
sales of L:3>5>>>5 and a total asset turnover of 3?
a. /7.>I
b. 17.=I
c. 7.6I
d. 3.7I
AN! A
olution!
*eturn on investment M $otal asset turnover times net profit margin M 3D7.6IE M /7I

$%#! *eturn on investment
73. What is the return on stockholders4 equity for a firm with a net profit margin of 6./ percent5 sales of
L7/>5>>>5 an equity multiplier of 1.;5 and total assets of L;>5>>>?
a. ;.3;I
b. 6.:3I
c. 16./:I
d. =.7I
AN! ,
olution!
*%( M 6./IDL7/>5>>>FL;>5>>>E 1.; M 16./:I

$%#! *eturn on equity
76. percent5
What is the
andcost of sales
earnings forta8es
after a firm
of with a gross profit margin of > percent5 a net profit margin of 3
L/>5>>>?
a. L/>>5>>>
b. L6>5>>>
c. L16>5>>>
d. L1/65>>>
AN! "
olution!
ales M (A$F>.>3 M L/>5>>>F>.>3 M L6>>5>>>
,ost of sales M D1 - >.EL6>>5>>> M L6>5>>>

77. f a firm has a total asset turnover of ; times and a return on total assets of 16I5 its net profit margin
must be
a. 1.;:6I
b. 1.=6I
c. /.>6I
d. /./6I
AN! A
olution!
N# M 16I F ; M 1.;:6I

7:. A firm4s current ratio is 1.6 and its quick ratio is 1.>. f its current liabilities are L1>5>>>5 what are its
inventories?
a. L 65>>>
b. L1>5>>>
c. L165>>>
d. L/>5>>>
AN! A
olution!
1.6 M current assets F L1>5>>>
,urrent assets M L165>>>
1.> M DL165>>> - inventoriesE F L1>5>>>
nventories M L65>>>
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12/23/2019 (DOC) Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE MULTIPLE CHOICE | Sandy Brown - Academia.

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE

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Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

GET A GLOBAL START NOW

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

31. f a firm4s current ratio is 1.65

AN! , #$! 1 %"&! $'#(! )act NA$! *eflective thinking

3/. f a firm4s total asset turnover ratio is /.>5

AN! 0 #$! 1 %"&! $'#(! )act NA$! *eflective thinking

33. f a firm4s price to earnings D#F(E ratio is 1>5

d. its return on stockholders4 equity is negative

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

AN! , #$! 1 %"&! $'#(! )act

3:. $he arket Kalue Added DKAE is the 2222222.

AN! 0 #$! 1 %"&! $'#(! )act NA$! *eflective thinking

3=. )irms with a positive economic value added D(KAE!

6>. 0eferred ta8es may occur due to the use of

AN! " #$! 1 %"&! $'#(! )act NA$! *eflective thinking

GET A GLOBAL START NOW

AN! " #$! 1 %"&! $'#(! )act NA$! *eflective thinking

AN! A #$! 1 %"&! $'#(! )act NA$! *eflective thinking

AN! , #$! 1 %"&! $'#(! )act NA$! *eflective thinking

AN! 0 #$! 1 %"&! $'#(! )act NA$! *eflective thinking

AN! 0 #$! 1 %"&! $'#(! )act NA$! *eflective thinking

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

(quity M $.A - $.0 M $.A - >.:6 $.A M >./6 $.A

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

#$! 1 %"&! $'#(! (. #rob. NA$! Analytic skills

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

Chapter 3—EVALUATION OF FINANCIAL PERFORMANCE M…  D O W N LO A

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