Finance 420 Final Exam 2 Questions
with Guaranteed Pass Solutions
(Rated A+) Updated.
Considered alone, which of the following would increase a company's current ratio? - Answer
An increase in accounts receivable.
Assume that a firm issues a six-month note to purchase inventory. Which of the following is true
if the current ratio before the purchase is 1.0? - Answer The firm's quick ratio will decrease.
The current ratio of a firm would equal its quick ratio whenever - Answer the firm has no
inventory.
Which of the following is correct about a firm with the following financial ratios over a 2-year
period? - Answer The firm is producing fewer sales compared to inventory over time.
Our company has an annual interest expense of $30,000 and pays income tax equal to 40
percent of taxable income (EBT). If our company's TIE ratio is 4.2, what is our net income? -
Answer $57,600
A company has a total equity of $560,000; sales of $2,250,000; total assets of $995,000; and
current liabilities of $310,000. What is the company's debt ratio? - Answer 43.72%
Company A uses the leverage to boost its return on equity to 30% this year, nearly 10% higher
than the industry average. However, the firm's stock price decreases relative to its industry
counterparts. Why might this occur? - Answer The market perceives the increase in leverage
as risky
A company has a total equity of $560,000; sales of $2,250,000; total assets of $995,000; and
current liabilities of $310,000. What is the company's debt ratio? - Answer 43.7%
Company A has a higher days sales outstanding ratio than Company B. All else equal, - Answer
Company B has a cash flow advantage over Company A.
A firm has sales of $2,250,000; a gross profit of $825,000; total operating costs of $620,000;
, The acid-test ratio of a firm would be unaffected by which of the following? - Answer A six-
month loan is used to reduce accounts payable.
Which of the following ratios measure the profitability of the firm? (Select all that apply) -
Answer - net profit margin
- return on assets
- return on equity
The DuPont Analysis includes the following ratios except: - Answer Total Debt Ratio
Which of the following ratios indicates expectations from the market about the firm's future
growth? - Answer Price to Earnings
All else being equal, which of the following actions would decrease the amount of cash on a
company's balance sheet? - Answer The company repurchases stock
Firm A has a higher debt ratio than Firm B, and Firm A also has a higher times interest earned
ratio than B.
If both firms have the same amount of total assets, then - Answer Firm A may have more non-
interest bearing liabilities, such as accounts payable, than Firm B has.
A firm decreased its day's sales outstanding (DSO) from 35 to 31 days. This implies the firm: -
Answer is more efficient in collecting the debts owed to the firm.
For a retailer with inventory to sell, the acid-test ratio will be - Answer less than the current
ratio, thus providing a more stringent measure of liquidity.
Company A and Company B have the same gross profit margin and the same total asset
turnover, but company A has a higher return on equity. This may result from - Answer
Company A has lower selling and administrative expenses, resulting in a higher net profit
margin.
A company reported sales revenue and net income during the current year of $500,000 and
$60,000, respectively. The total amount of stockholders' equity was $600,000, and common
shares outstanding were 120,000 all year. If the market price of the stock is $10, what is their
Market to Book ratio? - Answer 2
with Guaranteed Pass Solutions
(Rated A+) Updated.
Considered alone, which of the following would increase a company's current ratio? - Answer
An increase in accounts receivable.
Assume that a firm issues a six-month note to purchase inventory. Which of the following is true
if the current ratio before the purchase is 1.0? - Answer The firm's quick ratio will decrease.
The current ratio of a firm would equal its quick ratio whenever - Answer the firm has no
inventory.
Which of the following is correct about a firm with the following financial ratios over a 2-year
period? - Answer The firm is producing fewer sales compared to inventory over time.
Our company has an annual interest expense of $30,000 and pays income tax equal to 40
percent of taxable income (EBT). If our company's TIE ratio is 4.2, what is our net income? -
Answer $57,600
A company has a total equity of $560,000; sales of $2,250,000; total assets of $995,000; and
current liabilities of $310,000. What is the company's debt ratio? - Answer 43.72%
Company A uses the leverage to boost its return on equity to 30% this year, nearly 10% higher
than the industry average. However, the firm's stock price decreases relative to its industry
counterparts. Why might this occur? - Answer The market perceives the increase in leverage
as risky
A company has a total equity of $560,000; sales of $2,250,000; total assets of $995,000; and
current liabilities of $310,000. What is the company's debt ratio? - Answer 43.7%
Company A has a higher days sales outstanding ratio than Company B. All else equal, - Answer
Company B has a cash flow advantage over Company A.
A firm has sales of $2,250,000; a gross profit of $825,000; total operating costs of $620,000;
, The acid-test ratio of a firm would be unaffected by which of the following? - Answer A six-
month loan is used to reduce accounts payable.
Which of the following ratios measure the profitability of the firm? (Select all that apply) -
Answer - net profit margin
- return on assets
- return on equity
The DuPont Analysis includes the following ratios except: - Answer Total Debt Ratio
Which of the following ratios indicates expectations from the market about the firm's future
growth? - Answer Price to Earnings
All else being equal, which of the following actions would decrease the amount of cash on a
company's balance sheet? - Answer The company repurchases stock
Firm A has a higher debt ratio than Firm B, and Firm A also has a higher times interest earned
ratio than B.
If both firms have the same amount of total assets, then - Answer Firm A may have more non-
interest bearing liabilities, such as accounts payable, than Firm B has.
A firm decreased its day's sales outstanding (DSO) from 35 to 31 days. This implies the firm: -
Answer is more efficient in collecting the debts owed to the firm.
For a retailer with inventory to sell, the acid-test ratio will be - Answer less than the current
ratio, thus providing a more stringent measure of liquidity.
Company A and Company B have the same gross profit margin and the same total asset
turnover, but company A has a higher return on equity. This may result from - Answer
Company A has lower selling and administrative expenses, resulting in a higher net profit
margin.
A company reported sales revenue and net income during the current year of $500,000 and
$60,000, respectively. The total amount of stockholders' equity was $600,000, and common
shares outstanding were 120,000 all year. If the market price of the stock is $10, what is their
Market to Book ratio? - Answer 2
