Question 1

Precision Aviation had a profit margin of 6.25%, a total assets turnover of 1.5, and an equity multiplier of 1.8. What was the firm's ROE?

Accepted Answer

A)   15.23%
B)   16.03%
C)   16.88%
D)   17.72%
E)   18.60%

Question 2

A firm wants to strengthen its financial position. Which of the following actions would increase its quick ratio?

Accepted Answer

A)   Offer price reductions along with generous credit terms that would (1)  enable the firm to sell some of its excess inventory and (2)  lead to an increase in accounts receivable.
B)   Issue new common stock and use the proceeds to increase inventories.
C)   Speed up the collection of receivables and use the cash generated to increase inventories.
D)   Use some of its cash to purchase additional inventories.
E)   Issue new common stock and use the proceeds to acquire additional fixed assets.

Question 3

In general, if investors regard a company as being relatively risky and/or having relatively poor growth prospects, then it will have relatively high P/E and M/B ratios.

Accepted Answer

A) True 
 B)False

Question 4

Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $295,000 and its net income was $10,600. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $10,250 without changing its sales, assets, or capital structure. Had it cut costs and increased its net income by this amount, how much would the ROE have changed?

Accepted Answer

A)   6.55%
B)   7.28%
C)   8.09%
D)   8.90%
E)   9.79%

Question 5

You observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT?

Accepted Answer

A)   Its total assets turnover must be above the industry average.
B)   Its return on assets must equal the industry average.
C)   Its TIE ratio must be below the industry average.
D)   Its total assets turnover must be below the industry average.
E)   Its total assets turnover must equal the industry average.

Question 6

One problem with ratio analysis is that relationships can sometimes be manipulated. For example, if our current ratio is greater than 1.5, then borrowing on a short-term basis and using the funds to build up our cash account would cause the current ratio to INCREASE.

Accepted Answer

A) True 
 B)False

Question 7

Brookman Inc's latest EPS was $2.75, its book value per share was $22.75, it had 315,000 shares outstanding, and its debt/assets ratio was 44%. How much debt was outstanding?

Accepted Answer

A)   $4,586,179
B)   $4,827,557
C)   $5,081,639
D)   $5,349,094
E)   $5,630,625

Exam 4: Statement Analysis

Correct Answer
verified

Precision Aviation had a profit margin of 6.25%, a total assets turnover of 1.5, and an equity multiplier of 1.8. What was the firm's ROE?

Correct Answer
verified

Brookman Inc's latest EPS was $2.75, its book value per share was $22.75, it had 315,000 shares outstanding, and its debt/assets ratio was 44%. How much debt was outstanding?

Correct Answer
verified

In general, if investors regard a company as being relatively risky and/or having relatively poor growth prospects, then it will have relatively high P/E and M/B ratios.

Correct Answer
verified

You observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT?

Correct Answer
verified

A firm wants to strengthen its financial position. Which of the following actions would increase its quick ratio?

Correct Answer
verified

One problem with ratio analysis is that relationships can sometimes be manipulated. For example, if our current ratio is greater than 1.5, then borrowing on a short-term basis and using the funds to build up our cash account would cause the current ratio to INCREASE.

Correct Answer
verified

Exam 4: Statement Analysis

Correct AnswerverifiedShow Answer

Precision Aviation had a profit margin of 6.25%, a total assets turnover of 1.5, and an equity multiplier of 1.8. What was the firm's ROE?

Correct AnswerverifiedShow Answer

Brookman Inc's latest EPS was $2.75, its book value per share was $22.75, it had 315,000 shares outstanding, and its debt/assets ratio was 44%. How much debt was outstanding?

Correct AnswerverifiedShow Answer

In general, if investors regard a company as being relatively risky and/or having relatively poor growth prospects, then it will have relatively high P/E and M/B ratios.

Correct AnswerverifiedShow Answer

You observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

A firm wants to strengthen its financial position. Which of the following actions would increase its quick ratio?

Correct AnswerverifiedShow Answer

One problem with ratio analysis is that relationships can sometimes be manipulated. For example, if our current ratio is greater than 1.5, then borrowing on a short-term basis and using the funds to build up our cash account would cause the current ratio to INCREASE.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified