Q&A Hero

Q: What is the internal growth rate for 2015?A. 5.83%B. 6.24%C. 6.15%D. 5.18%E. 7.70%

Q: If accounts payable have increased during a period, a. revenues on an accrual basis are less than revenues on a cash basis b. expenses on an accrual basis are less than expenses on a cash basis c. expenses on an accrual basis are the same as expenses on a cash basis d. expenses on an accrual basis are greater than expenses on a cash basis

Q: Deep Falls Timber stock sold for $6.50 a share as of 2015. What was the market-to-book ratio at that time?A. 1.78B. 2.22C. 2.78D. 3.03E. 3.22

Q: Deep Falls Timber stock sold for $6.50 a share as of 2015.What was the price-earnings ratio at that time?A. 17.12B. 29.94C. 12.82D. 28.15E. 19.64

Q: What are the values of the three components of the DuPont identity for 2015?A. 7.91%; 1.0248; 1.4806B. 8.57%; 1.0248; .6754C. 7.91%; .9758; 1.4806D. 11.43%; .9758; .6754E. 11.43%; 1.0248; 1.4806

Q: What is the cash coverage ratio for 2015?A. 11.06B. 6.02C. 13.79D. 14.89E. 8.78

Q: Cash paid for preferred stock dividends should be shown on the statement of cash flows under a. investing activities b. financing activities c. noncash investing and financing activities d. operating activities

Q: What is the equity multiplier for 2015?A. 1.48B. 1.28C. 1.66D. 2.13E. 2.99

Q: Which of the following would not be on the statement of cash flows? a. cash flows from investing activities b. cash flows from financing activities c. cash flows from operating activities d. cash flows from contingent activities

Q: What are the days' sales in inventory for 2015? (Use ending inventory)A. 61.84 daysB. 62.79 daysC. 67.51 daysD. 42.97 daysE. 40.08 days

Q: Firefly Inc. sold land for $225,000 cash. The land had been purchased 5 years earlier for $275,000. The loss on the sale was reported on the income statement. On the statement of cash flows, what amount should Firefly report as an investing activity from the sale of the land? a. $225,000 b. $275,000 c. $50,000 d. $500,000

Q: What is the current ratio for 2015?A. 1.95B. .95C. 2.06D. 1.98E. .98

Q: A firm has a return on equity of 16.2 percent, a debt-equity ratio of 44 percent, a capital intensity ratio of 1.08, a current ratio of 1.25, and current assets of $138,000. What is the profit margin?A. 12.15%B. 9.72%C. 7.48%D. 15.19%E. 13.69%

Q: Samuelson's has sales of $317,000, a profit margin of 8.6 percent, an equity multiplier of 1.8, and total debt of $144,400. What is the return on equity?A. 15.48%B. 14.46%C. 7.05%D. 15.10%E. 11.25%

Q: Which of the following can be found on the statement of cash flows? a. cash flows from operating activities b. total assets c. total changes in stockholders' equity d. changes in retained earnings

Q: Frederico's has a net income of $29,600, a total asset turnover of 1.4, total assets of $318,600, and a debt-equity ratio of .35. What is the return on equity?A. 16.72%B. 8.40%C. 12.54%D. 14.67%E. 17.56%

Q: The order of presentation of activities on the statement of cash flows is a. operating, investing, and financing b. operating, financing, and investing c. financing, operating, and investing d. financing, investing, and operating

Q: Income tax expense was $175,000 for the year. Income taxes payable was $30,000 and $40,000 at the beginning and end of the year, respectively. Cash paid for income taxes reported on the statement of cash flows using the direct method is a. $175,000 b. $165,000 c. $205,000 d. $215,000

Q: Preston Woods has 17,500 shares of stock outstanding along with $408,000 of interest bearing debt. The market and book values of the debt are the same. The firm has sales of $697,000 and a profit margin of 6.8 percent. The tax rate is 35 percent, the debt-equity ratio is 40 percent, and the price-earnings ratio is 11.8. The firm has $130,000 of current assets of which $41,200 is cash. What is the enterprise value multiple?A. $1,106,308B. $994,520C. $830,479D. $1,018,097E. $926,073

Q: A firm has 12,000 shares of stock outstanding, sales of $638,100, a profit margin of 8.2 percent, a tax rate of 35 percent, a price-earnings ratio of 11.3, and a book value per share of $7.98. What is the market-to-book ratio?A. 6.08B. 5.42C. 5.16D. 6.17E. 6.90

Q: On the statement of cash flows, the operating activities section would include a. cash received from the issuance of common stock b. cash paid for interest on short-term notes payable c. cash paid for the purchase of investments d. cash paid for cash dividends

Q: New Metals has depreciation of $28,300, interest expense of $11,400, EBIT of $62,700, a price-earnings ratio of 8.6, a profit margin of 7.2 percent, a tax rate of 34 percent, and 37,500 shares of stock outstanding. What is the market price per share?A. $3.48B. $5.09C. $7.76D. $12.48E. $9.92

Q: Depreciation on factory equipment would be reported on the statement of cash flows prepared by the indirect method in a. the Cash Flows from (used for) Financing Activities section b. the Cash Flows from (used for) Investing Activities section c. a separate section of noncash investing and financing activities d. the Cash Flows from (used for) Operating Activities section

Q: Free cash flow is a measure of the operating cash flow available to a company after it a. purchases the PP&E needed to maintain current production b. pays dividends and redeems bonds payable c. invests in the PP&E needed to achieve desired future productive capacity d. invests in needed fixed assets and redeems bonds payable

Q: Discount Mart has $876,400 in sales. The profit margin is 3.8 percent. There are 32,500 shares of stock outstanding. The market price per share is $21.60. What is the price-earnings ratio?A. 23.40B. 22.60C. 19.21D. 21.08E. 18.47

Q: Sun Shade's has sales of $363,000, total assets of $323,500, and a profit margin of 14.6 percent. The firm has a total debt ratio of 54 percent. What is the return on equity?A. 28.45%B. 35.61%C. 23.29%D. 31.74%E. 7.88%

Q: Uptowne Restaurant has sales of $418,000, total equity of $224,400, a tax rate of 34 percent, a debt-equity ratio of .37, and a profit margin of 5.1 percent. What is the return on assets?A. 6.93%B. 9.50%C. 11.08%D. 7.13%E. 13.13%

Q: Use this information for Pierce Company to answer the questions that follow.On May 1, Pierce Company purchased $60,000 of Stanton Company’s 12% bonds at 100 plus accrued interest of $2,400. On June 30, Pierce received its first semiannual interest. On February 1, Pierce sold $50,000 of the bonds at 103 plus accrued interest.The journal entry Pierce records on June 30 will include a a. credit to Interest Revenue for $2,400 b. debit to Cash for $3,600 c. credit to Cash for $2,400 d. credit to Interest Receivable for $1,200

Q: Alan Company purchased $400,000 of ABC Co. 5% bonds at 100 plus accrued interest of $4,500. Alan later sold $250,000 of the bonds at 97. The journal entry for the purchase would include a a. credit to Interest Receivable for $4,500 b. credit to Interest Revenue for $4,500 c. debit to Interest Receivable for $4,500 d. debit to Interest Revenue for $4,500

Q: Two Sisters Dresses has net working capital of $43,800, net fixed assets of $232,400, net income of $43,900, and current liabilities of $51,300. The tax rate is 35 percent and the profit margin is 9.3 percent. How many dollars worth of sales are generated from every $1 in total assets?A. $1.44B. $1.32C. $1.73D. $.97E. $1.06

Q: Held-to-maturity securities a. are reported at fair market value b. include stocks as well as bonds c. may be reported as current or noncurrent assets d. All of these choices

Q: Northern Industries has accounts receivable of $42,300, inventory of $61,200, sales of $544,200, and cost of goods sold of $393,500. How many days, on average, does it take the firm to sell its inventory?A. 93.08B. 74.92C. 85.14D. 56.77E. 80.46

Q: Home Systems has sales of $312,800, cost of goods sold of $218,400, inventory of $46,300, and accounts receivable of $62,700. How many days, on average, does it take the firm to both sell its inventory and collect payment on the sale?A. 142.10B. 96.37C. 178.21D. 150.54E. 124.03

Q: The account Unrealized Gain (Loss) on Available-for-Sale Investments should be included on the a. income statement in the Other Revenue and Expense section b. balance sheet as an adjustment to the asset account c. balance sheet as an adjustment to stockholders' equity d. statement of retained earnings

Q: Rosita's Resources paid $11,310 in interest and $16,500 in dividends last year. The times interest earned ratio is 2.9, the depreciation expense is $7,900, and the tax rate is 35 percent. What is the value of the cash coverage ratio?A. 3.71B. 2.58C. 3.60D. 2.78E. 3.10

Q: Cash generated from operations can be used for which of the following investment purposes? a. supporting current operating activities b. investing in temporary and long-term investments to earn additional revenue and/or realize an appreciation in value c. investing in the stock of other companies for strategic reasons d. All of these choices

Q: Wybro's Markets has sales of $684,000, costs of $437,000, interest paid of $13,800, total assets of $712,000, and depreciation of $109,400. The tax rate is 35 percent and the equity multiplier is 1.6. What is the return on equity?A. 11.30%B. 13.92%C. 7.06%D. 15.48%E. 18.08%

Q: When the fair value method is used to account for an equity investment, the carrying value of the investment is affected by a. the dividend distributions of the investee b. the periodic net income of the investee c. the earnings and dividend distributions of the investee d. neither the earnings nor the dividends of the investee

Q: Cado Industries has total debt of $6,800 and a debt-equity ratio of .36. What is the value of the total assets?A. $18,889B. $24,480C. $23,520D. $25,689E. $25,360

Q: If one company owns more than 50% of the common stock of another company, a. a partnership exists b. a parent-subsidiary relationship exists c. the company whose stock is owned must be liquidated d. the cost method should be used to account for the investment

Q: Browning's has a debt-equity ratio of .47. What is the equity multiplier?A. 1.47B. .53C. 2.13D. 1.13E. 1.53

Q: Available-for-sale securities are securities that management expects to sell in the future, but not in the near term. a. True b. False

Q: Jessica's Boutique has cash of $218, accounts receivable of $457, accounts payable of $398, and inventory of $647. What is the value of the quick ratio?A. .55B. 1.05C. 1.70D. 1.32E. 1.52

Q: The equity method is usually more appropriate for accounting for investments where the purchaser does not have significant influence over the investee. a. True b. False

Q: A firm has sales of $38,900, net income of $2,400, total assets of $43,100, and total equity of $24,700. Interest expense is $830. What is the common-size statement value of the interest expense?A. 2.13%B. 3.08%C. 1.93%D. 2.49%E. 3.46%

Q: The cumulative effects of other comprehensive income items are included in retained earnings on the balance sheet. a. True b. False

Q: A firm has sales of $22,400, net income of $3,600, net fixed assets of $18,700, inventory of $2,800, and total current assets of $6,300. What is the common-size statement value of inventory?A. 10.07%B. 13.67%C. 11.20%D. 12.50%E. 9.84%

Q: It is not possible for one company to influence the operating policies of another company unless it owns more than a 50% interest in that company. a. True b. False

Q: Which account is least apt to vary directly with sales?A. notes payableB. inventoryC. cost of goods soldD. accounts payableE. accounts receivable

Q: Most companies invest excess cash in bonds as investments in order to profit long-term from the growth of the investment. a. True b. False

Q: Which one of the following depicts a correct relationship?A. Dividend payout ratio = 1 " Retention ratioB. Total asset turnover = 1 + Capital intensity ratioC. ROA = ROE (1 + Debt-equity ratio)D. ROE = 1 " ROAE. Equity multiplier = 1 " Debt-equity ratio

Q: A corporation owning all or a majority of the voting stock of another corporation is known as the parent company. a. True b. False

Q: The return on equity can be calculated as:A. ROA Equity multiplier.B. Profit margin ROA.C. Profit margin ROA Total asset turnover.D. ROA (Net income / Total assets).E. ROA Debt-equity ratio.

Q: The cumulative effects of other comprehensive income items may be reported separately from retained earnings and paid-in capital on the balance sheet as accumulated other comprehensive income. a. True b. False

Q: The equity multiplier measures:A. financial leverage.B. returns to stockholders.C. operating efficiency.D. management efficiency.E. asset use efficiency.

Q: Trading securities should be reported on the financial statements at fair market value. a. True b. False

Q: Enterprise value is based on the:A. market value of interest bearing debt plus the market value of equity minus cash.B. book values of debt and assets, other than cash.C. market value of equity plus the book value of total debt minus cash.D. book value of debt plus the market value of equity.E. book values of debt and equity less cash.

Q: A public firm's market capitalization is equal to the:A. total book value of assets less book value of debt.B. par value of common equity.C. price per share multiplied by number of shares outstanding.D. firm's stock price multiplied by the number of shares authorized.E. the maximum value an acquirer would pay for the firm in an acquisition.

Q: A foreign currency adjustment is an example of an item that would be included in other comprehensive income. a. True b. False

Q: Ordinarily, a corporation owning a significant portion of the voting stock of another corporation accounts for the investment using the equity method. a. True b. False

Q: Financial planning, when properly executed:A. ignores the normal restraints encountered by a firm.B. is based on the internal rate of growth.C. reduces the necessity of daily management oversight of the business operations.D. ensures internal consistency among the firm's various goals.E. eliminates the need to plan more than one year in advance.

Q: One of the primary weaknesses of many financial planning models is that they:A. rely too much on financial relationships and too little on accounting relationships.B. are iterative in nature.C. ignore the goals and objectives of senior management.D. ignore cash payouts to stockholders.E. ignore the size, risk, and timing of cash flows.

Q: When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price. a. True b. False

Q: Marcie's Mercantile wants to maintain its current dividend policy, which is a payout ratio of 35 percent. The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio. Given these requirements, the maximum rate at which Marcie's can grow is equal to:A. 35 percent of the internal rate of growth.B. 65 percent of the internal rate of growth.C. the internal rate of growth.D. the sustainable rate of growth.E. 65 percent of the sustainable rate of growth.

Q: Trading securities are reported on the balance sheet at cost. a. True b. False

Q: If a firm bases its growth projection on the rate of sustainable growth, shows positive net income, and has a dividend payout ratio of 30 percent, then the:A. fixed assets will have to increase at the same rate, even if the firm is currently operating at only 78 percent of capacity.B. number of common shares outstanding will increase at the same rate of growth.C. debt-equity ratio will have to increase.D. debt-equity ratio will remain constant while retained earnings increase.E. fixed assets, the debt-equity ratio, and number of common shares outstanding will all increase.

Q: Investments in bonds that management intends to hold to maturity are called trading securities. a. True b. False

Q: The sustainable growth rate:A. assumes there is no external financing of any kind.B. is normally higher than the internal growth rate.C. assumes the debt-equity ratio is variable.D. is based on receiving additional external debt and equity financing.E. assumes the dividend payout ratio is equal to zero.

Q: The equity method causes the investment account to mirror the proportional changes in book value of the investee. a. True b. False

Q: The sustainable growth rate will be equivalent to the internal growth rate when, and only when,:A. a firm has no debt.B. the growth rate is positive.C. the plowback ratio is positive but less than 1.D. a firm has a debt-equity ratio equal to 1.E. the retention ratio is equal to 1.

Q: Held-to-maturity securities maturing beyond a year are reported as noncurrent assets. a. True b. False

Q: Held-to-maturity investments are recorded at their cost, which would include broker’s commissions. a. True b. False

Q: The maximum rate at which a firm can grow while maintaining a constant debt-equity ratio is best defined by its:A. rate of return on assets.B. internal rate of growth.C. average historical rate of growth.D. rate of return on equity.E. sustainable rate of growth.

Q: The least problem encountered when comparing the financial statements of one firm with those of another firm occurs when the firms:A. are in different lines of business.B. have geographically diverse operations.C. use different methods of depreciation.D. are both classified as conglomerates.E. have the same fiscal year-end.

Q: If bonds are purchased between interest dates, the buyer must also pay the seller any accrued interest since the last interest payment date. a. True b. False

Q: In the financial planning model, the external financing needed (EFN) as shown on a pro forma balance sheet is equal to the changes in assets:A. plus the changes in liabilities minus the changes in equity.B. minus the changes in both liabilities and equity.C. minus the changes in liabilities.D. plus the changes in both liabilities and equity.E. minus the change in retained earnings.

Q: Held-to-maturity securities are reported on the balance sheet at fair market value. a. True b. False

Q: The most effective method of directly evaluating the financial performance of a firm is to compare the financial ratios of the firm to:A. the firm's ratios from prior time periods and to the ratios of firms with similar operations.B. the average ratios of all firms within the same country over a period of time.C. those of other firms located in the same geographic area that are similarly sized.D. the average ratios of the firm's international peer group.E. those of the largest conglomerate that has operations in the same industry as the firm.

Q: Equity investments do not have a fixed maturity date. a. True b. False

Q: It is easier to evaluate a firm using its financial statements when the firm:A. is a conglomerate.B. is global in nature.C. uses the same accounting procedures as other firms in its industry.D. has a different fiscal year than other firms in its industry.E. tends to have one-time events such as asset sales and property acquisitions.