Questions in multiple choice test.qz

2) Use the following tax table to answer this question. Taxable Income Tax Rate

$0-50,000               15%

$50,001-75,000       25%

$75,001-100,000 34%

$100,001-335,000            39%

How much tax will a firm owe if the taxable income for the year is $74,000?

[x] $13,500

3) The cash flow from assets is equal to the cash flow to:

[x] stockholders plus the cash flow to creditors.

4) Brandy's Candies paid a total of $23 million in dividends last year and repurchased (mua lại) $27 million worth of common stock. What was the cash flow to stockholders for the year?

[x] -$4 million

8) ET Enterprises has net income of $38,250. It has $15,000 in depreciation expense and $7,000 in interest expense. The applicable tax rate is 15%. What is ET's operating cash flow?

[x] $60,250

9) Which of the following statements are true about the balance sheet and income statement?

I. The income statement reflects a summary of activity that occurs over a period of time.

II. The balance sheet reflects the financial status of a firm as of a particular date.

III. The income statement reflects the operating cash flow of a firm.

IV. The balance sheet reflects the market value of a firm.

[x] I and II only

10) A(n) __________ asset is one that can be sold quickly without a significant loss in value.

[x] liquid (A company’s most liquid assets are its holdings of cash and marketable

securities)

11) Operating cash flow is equal to EBIT:

[x] plus depreciation minus taxes.

12) Last year, the Lucky K Ranch had net income of $214,500. The average tax rate was 34%. The ranch had expenses of $6,300 for interest and $21,500 for depreciation. All other expenses were $695,100. What was the amount of their sales for the year?

[x] $1,047,900

13) Which one of the following statements is correct?

[x] Operating cash flow is equal to EBIT plus depreciation minus taxes.

14) Financial leverage __________ the potential reward to shareholders while _________ the risk of financial distress for the firm.

[x] increases; decreasing

16) Use the following tax table to answer this question. Taxable IncomeTax Rate

$0-50,000               15%

$50,001-75,000       25%

$75,001-100,000 34%

$100,001-335,000            39%

What is the marginal tax rate for a firm with a taxable income of $103,500 for the year?

[x] 39.0%

17) An increase in which of the following results in an increase in operating cash flow, all else constant?

I. interest expense

II. depreciation

III. taxes

[x] I and II only

18) Last year, McKay, Inc., had an operating cash flow of $329,700, its net fixed asset

account declined by $3,000, and its depreciation expense was $17,000. Also during the year, net working capital increased from $22,000 to $24,000. What is the company's cash flow from assets for the year?

[x] $307,700

19) Lo-Do, Inc. has a beginning net fixed asset balance of $3.4 million and an ending net fixed asset balance of $2.9 million. The depreciation expense is $750,000 and the interest expense is $218,000. What is the amount of the firm's net capital spending for the period?

[x] $250,000

21) A firm's balance sheet shows current assets of $95, net fixed assets of $250, long-term debt of $40, and owners' equity of $200. What is the value of the firm's current liabilities if that is the only remaining balance sheet item?

[x] $105

23) Last year, LMK Corporation had $900,000 in earnings before interest and taxes, $600,000 in net capital spending, and $500,000 in depreciation expense. The net working capital decreased by $15,000 and the firm paid $200,000 in taxes. What is the firm's cash flow from assets?

[x] $585,000

26) The value derived (nhận được) from subtracting (trừ) current liabilities from current assets is called:

[x] net working capital.

28) The balance sheet of Black Enterprises as of December 31 contains the following

information: cash $115, net fixed assets $1,000, accounts receivable $410, long-term debt $910, owners' equity $905, accounts payable $60, and inventory $350. What is the value of the net working capital?

[x] $875

29) Which one of the following is the correct formula for computing operating cash flow?

[x] EBIT plus depreciation minus taxes

30) Which of the following are components of the cash flow to creditors?

I. dividends paid

II. net new borrowing

III. interest paid

IV. net new equity

[x] I and III only

31) RDJ Manufacturing has 600 shares of stock outstanding and $900 in retained earnings at the end of the year. Net income for the year is $600. $240 in dividends were paid out during the year. What is the amount of RDJ's earnings per share?

[x] $1.00

32) Cash flow to stockholders is equal to:

[x] dividends paid minus net new equity raised.

34) Jupiter, Inc., has total assets of $550, net fixed assets of $375, current liabilities of $140, owners' equity of $265, and long-term debt of $145. If current assets are the only other item on the balance sheet what is the value of the net working capital?

[x] $175

35) Which one of the following statements is true?

[x] Dividends are a cash outflow to stockholders.

36) A firm has net income of $27,720 and a tax rate of 34 percent. Sales are $128,900, other costs are $21,200, costs of goods sold are $43,200, and interest paid is $1,600. What is the amount of the depreciation expense?

[x] $20,900

38) Bacon Industries has an average tax rate of 22 percent and a marginal tax rate of 34 percent. How much additional tax will the firm owe if they increase their taxable income by

$18,600?

[x] $6,324

39) Use the following tax table to answer this question. Taxable Income Tax Rate

$0-50,000               15%

$50,001-75,000       25%

$75,001-100,000 34%

$100,001-335,000            39%

The total tax due on a taxable income of $116,500 is:

[x] $28,685.

40) Net income:

[x] per share is equal to net income divided by the number of shares outstanding.

41) Which one of the following would be the best indication that a firm should be able to remain viable over the long-term?

[x] a positive cash flow from operations

43) Guthrie and Sons has sales for the period of $13,500, costs of goods sold of $4,000, general and administrative expenses of $3,500, interest expense of $2,000, and depreciation expense of $2,000. The tax rate is 34 percent. What is the amount of the net income?

[x] $1,320

44) RTF, Inc., has current assets of $1,250, total assets of $3,500, total equity of $1,800, and

long-term debt of $1,000. What is the value of the net working capital?

[x] $550

45) ABC, Co. finances its operations with a combination of debt and equity. The degree of financial leverage:

[ ] increases when ABC increases its total assets while keeping its debt to equity ratio constant.

[ ] decreases when ABC issues bonds to purchase some new equipment.

[ ] increases when ABC sells some equipment with a book value of $1,200 for a cash price of $1,200.

[ ] decreases when ABC sells additional shares of stock and pays off some long-term debt.

[ ] decreases when ABC issues long-term bonds to pay off the mortgage on its office building.

48) Wise, Inc., paid $31,000 in interest last year while long-term debt decreased from $310,000 to $250,000. What was the cash flow to creditors?

[x] -$29,000

50) Use the following tax table to answer this question. Taxable Income Tax Rate

$0-50,000               15%

$50,001-75,000       25%

$75,001-100,000 34%

$100,001-335,000            39%

In The Black, Inc., made $250,000 in taxable income last year selling greeting cards. What is

the firm's average tax rate?

[x] 32.3 percent

51) Pablo, Inc., has sales of $16,500, depreciation of $1,120, costs of goods sold of $10,350, other expenses of $3,118, and interest expense of $900. The tax rate is 34 percent. What is the amount of the operating cash flow?

[x] $2,687.92

52) LaMont Industries had cash flow from operations of $19,300 last year. The

depreciation expense was $2,300, interest expense was $600, and taxes were $1,400.

They have 40,000 shares of stock outstanding. What is the earnings per share for last year?

[x] $0.41

53) A firm with negative net working capital:

[x] has more current liabilities than current assets.

56) Which one of the following is a noncash item?

[x] depreciation

57) Net new borrowing is the change in:

[x] long-term debt.

58) Which of the following are current assets?

I. cash

II. inventory

III. equipment

IV. accounts receivable

[x] I, II, and IV only

59) Henderson && Daughter, Inc., has sales for the year of $236,000, total cash expenses of $167,500, and depreciation expense of $18,000. The tax rate is 35 percent and the dividend payout ratio is 60 percent. The firm sold $25,000 in additional shares of stock during the year. What is the amount of the cash flow to stockholders (CFS)?

[x] -$5,305

60) Which one of the following assets is generally considered the LEAST liquid?

[x] inventory manufactured by the firm

61) Which one of the following is NOT part of the operating cash flow of a firm?

[x] interest expense

62) Which one of the following is generally considered the most liquid?

[x] accounts receivable

63) Intangible assets:

[x] include such things as patents and trademarks.

64) Generally, it is the __________ tax rate that is most relevant when making financial decisions.

[x] average

65) Last year, Robert's Cars paid interest of $2,400. During that year, the firm paid off one long-term loan for $15,000 and then borrowed $9,500 which is to be repaid in one lump sum after eighteen months. What is the value of the cash flow to creditors for last year?

[x] -$3,100

67) If the cash flow from assets is negative, then:

[x] either the cash flow to creditors or the cash flow to stockholders, or both, must be negative

69) Balance sheet assets:

I. always have a value equal to total liabilities minus shareholders' equity.

II. are listed in order of increasing liquidity.

III. represent items acquired with the use of liabilities and equity. 

[x] III only

70) Kurt's Antiques has an operating cash flow of $13,500, an increase in net working capital of $1,500, an increase in net capital spending of $15,000, and dividends of $800. There have been no changes in the common stock account. What is the value of the cash flow to creditors?

[x] -$3,800

73) Net capital spending is equal to ending net fixed assets:

[x] minus beginning net fixed assets plus depreciation.

74) A current liability is defined as those debts which:

[x] must be paid within the next twelve months.

Questions in [New Questions]

3) A firm's current ratio is 1.5. Which one of the following actions will increase this ratio?

[ ] discarding and writing off spoiled inventory

[ ] receiving full payment on an account receivable

[ ] paying off a short-term bank loan with the proceeds from new long-term debt

[ ] purchasing new fixed assets using the proceeds from a new stock issue

[ ] buying inventory on credit, thereby increasing accounts payable

4) A firm sold some of its fixed assets for cash. As a result, the:

[ ] current ratio increased, while the quick ratio remained unchanged.

[x] quick ratio and the current ratio both increased.

6) Financial ratios can be affected by the:

I. replacement of old equipment with new equipment.

II. use of cash to pay off short-term creditors.

III. replacement of short-term debt with long-term debt.

[ ] I only

[ ] II only

[ ] I and III only

[ ] II and III only

[ ] I, II, and III only

7) A firm has current liabilities of $500, a current ratio of 1.3, and a quick ratio of 0.70. How much inventory does this firm have?

[x] $300

8) A times interest earned ratio of 2.7 means that:

[x] a firm has sufficient EBIT to cover its interest expense 2.7 times.

9) In words, what does a total asset turnover of 1.5 mean?

[x] For each $1 of total assets, the firm generates $1.50 in sales.

12) A firm's accounts receivable declined by $275,000. All else constant, the firm's:

[x] current ratio decreased.

14) Which of the following is (are) a measure of profitability?

I. return on assets

II. return on equity

III. market-to-book ratio

IV. profit margin

[x] I, II, and IV only

15) Which of the following are components of the return on assets?

I. net income

II. equity multiplier

III. profit margin

IV. total asset turnover

[x] I and IV only

16) Which of the following are incorporated into the calculation of the Du Pont identity?

I. return on assets

II. equity multiplier

III. total asset turnover

IV. profit margin

[x] III and IV only

17) Which one of the following statements is true?

[x] Since inventory is not as liquid as the other current assets, it is excluded in the calculation of the quick ratio.

18) Which one of the following conditions causes the return on equity to equal the return on assets?

[ ] long-term debt equals zero

[ ] debt-equity ratio equals 1

[ ] total debt ratio equals .5

[ ] ROE is equal to 100 percent

[ ] total debt equals zero

19) A firm has a ROA of 8 percent, sales of $100, and total assets of $75. What is the profit margin?

[x] 6.0 percent

20) A firm has a total book value of equity of $6 million, a market-to-book ratio of 3, and a book value per share of $4.00. What is the total market value of the firm's equity?

[x] $18 million

21) Which one of the following types of ratios is used to determine a firm's long-run ability to meet its financial obligations?

[ ] liquidity

[ ] asset-utilization

[ ] profitability

[ ] financial leverage

[ ] market value

22) If the total assets of a firm decrease while all the other components of ROE remain unchanged, the firm's:

[x] ROE will remain unchanged. 

25) Ernst Industries has 300,000 shares of common stock outstanding, sales of $12 million, net income of $1.1 million, and depreciation of $2 million. What are the earnings per share for Ernst Industries?

[x] $3.67

28) Which one of the following statements about the current ratio is accurate?

[x] The current ratio will always be greater than the quick ratio in companies that carry inventory.

29) A firm is having difficulty controlling its operating expenses. Which one of the following ratio categories will most directly reflect this problem?

[x] liquidity

33) Which one of the following can you compute using only information found on a balance sheet?

[x] equity multiplier

34) Katy Did, Inc., had a cost of goods sold of $4,600, net working capital of $110, total current assets of $500, and a quick ratio of 0.7. What is Katy Did's days' sales in inventory, assuming a 365-day year? Round your answer to the nearest whole day.

[x] 18 days

36) Hilton Publishing and Jordan Publishing have identical debt-to-equity ratios and profit margins. However, Hilton's ROA is higher than Jordan's. Therefore, it must be true that:

[x] Hilton uses its assets more efficiently to generate sales.

38) Which one of the following is a liquidity ratio?

[x] quick ratio

9) CatchaTan Co. had net sales of $750,000 over the past year. During that time, average receivables were $150,000. Assuming a 365-day year, what was the average collection

period?

[x] 73 days

41) A firm has sales of $750, total assets of $400, and a debt-equity ratio of 1.50. If the return on equity is 10 percent, what is the firm's net income?

[ ] $16

[ ] $20

[ ] $32

[ ] $40

[ ] $75

42) ABC Co. has a profit margin of 5 percent, ROE of 10 percent, a debt-equity ratio of 1.5, and total assets of $300. What is the amount of the firm's sales?

[ ] $75

[ ] $240

[ ] $380

[ ] $450

[ ] $600

44) The Vita Corp. has an average collection period of 43 days based on a 365-day year. Sales for the year are $700,000. What is the average investment in receivables?

[x] $82,466

45) In a common-size financial statement, balance sheet accounts are expressed as a percentage of total __________, while income statement accounts are expressed as a percentage of total:

[x] assets; assets.

46) A very short-term creditor, such as a supplier who grants credit for only 30 days, is likely to be most interested in a firm's:

[x] quick ratio.

47) The quick ratio:

[x] excludes the value of the inventory.

49) Which one of the following is classified as a liquidity ratio?

[x] cash ratory

53) The sales of Jack's Sporting Goods have increased recently and inventory has declined slightly. A financial analyst would expect to find that the inventory turnover has __________ and the days' sales inventory has:

[x] increased; decreased

54) Jorge, Inc., has 200,000 shares of stock outstanding. The firm has an EBIT of $1 million and interest paid of $100,000. The tax rate is 34 percent. What is Jorge's

earnings per share?

[x] $2.97

55) The Jackson Company has net income of $2,640, interest paid of $500, and depreciation of $1,050. The corporate tax rate is 34 percent. What is the cash coverage ratio?

[x] 11.1

56) Flo-Jet, Inc., has a current ratio of 1.5. This implies that if the firm liquidates its current assets in order to pay off its current liabilities, it can sell the current assets for a minimum of ________ percent of book value and still pay off the current liabilities in full.

[x] 150

57) Bert's Enterprises has a current ratio of 1.8, a quick ratio of 0.9, net income of $140,000, a profit margin of 10 percent, and an accounts receivable balance of $120,000. What is the firm's average collection period, based on a 365-day year? Round your answer to the nearest whole day.

[x] 31 days

58) Vendors providing trade credit to a firm would tend to be most interested in which one of the following ratio categories?

[x] liquidity

59) The relationship between the market value of a firm and its earnings is known as the:

[x] price-earnings ratio.

60) A firm has a return on equity of 15 percent, earnings before taxes of $30,000, a total asset turnover of.80, a profit margin of 4.5 percent, and a tax rate of 35 percent. What is the firm's return on assets?

[ ] 3.6 percent

[ ] 3.9 percent

[ ] 5.7 percent

[ ] 6.4 percent

[ ] 

61) Neff Brewing has current liabilities of $280,000, a quick ratio of 1.7, an inventory turnover rate of 5.0, and a current ratio of 2.3. What is the value of the cost of goods sold?

[x] $840,000

62) In words, what does an equity multiplier of 2 mean?

[x] For every $1 in assets, the firm has $2 in equity.