Assignment
Question 1
Which of the following is a correct statement regarding a method of drafting a company's income statement?
The non-operating section of the multi-step method covers all non-primary revenues and losses.
The multi-step method requires calculating the gross profit then subtracting operating expenses.
The single-step method requires totaling a company's revenue, then subtracting all of its costs.
All of these answers.
Question 2
Which of the following is NOT a correct definition of a basic type of financial ratios?
Profitability ratios measure the firm's use of its assets to generate an acceptable rate of return.
Debt ratios measure the firm's ability to pay long-term debt.
Activity ratios are concerned with shareholder audiences.
Liquidity ratios measure the availability of cash to pay debt.
Question 3
During a fiscal year, a company has $20,000,000 in revenue. Its operating expenses are $17,000,000. What is the company's operating margin?
.73
0.15
.13
0.85
Question 4
During a fiscal year, a company had $25,000,000 in total sales. It had a cost of goods sold (COGS) of $18,000,000 and $4,000,000 in additional expenses. What is the company's gross profit margin?
12%
28%
33.33%
16%
Question 5
A company had $5,000,000 in total revenues for its fiscal year. Its expenses for the year were $3,500,000. Its total assets were $12,500,000. What is the company's return on assets for the fiscal year?
.40
0.12
.28
.70
Question 6
A company has assets of $2,000,000, net sales of $3,000,000, and $1,500,000 in equity. Its net income is $10,000,000. What is its return on equity?
3.333
15
6.667
5
Question 7
A business begins its fiscal year with an inventory balance of $1,000,000. During that year its cost of goods sold is $3,500,000. Its inventory balance at the end of the year is $500,000. What is its inventory turnover for the year?
78.16
.21
.12
4.67
Question 8
A business has $1,250,000 in accounts receivable. Its annual sales for the fiscal year is $30,000,000. What is its days sales outstanding ratio?
0.041
8760
24
15.208
Question 9
At the beginning of a fiscal year, a company has $1,000,000 in fixed assets. During that year, it makes $8,000,000 in net sales. At the end of the fiscal year it has $1,500,000 in fixed assets. What is its fixed-asset turnover ratio?:
8
5.333
.15625
6.4
Question 10
A company has $100,00 in cash, $300,000 in accounts receivable, $50,000 in inventory and a $300,000 office building. Its current liabilities are $250,000. What is the company's current ratio, and does that ratio good short-term financial strength?
The current ratio is 1.8, and the ratio indicates good short-term financial strength.
The current ratio is 3, and the ratio indicates good short-term financial strength.
The current ratio is 3, and the ratio indicates poor short-term financial strength.
The current ratio is 1.8, and the ratio indicates poor short-term financial strength.
Question 11
Which of the following statements about the total debt to total assets ratio is NOT true?
If a company's debt to asset ratio is less than 0.5, most of its assets are financed through debt.
The debt ratio is calculated by dividing a company's total liability by its total assets.
The higher the total debt to total asset ratio, the greater the financial risk.
A highly leveraged company could be in danger if its creditors demand repayment.
Question 12
Suppose that a public corporation has $100 million net income. If its P/E ratio is 3.5 and it has 1 million shares outstanding, what is the value of stock price?
350
10
100
35
Question 13
Suppose that a public corporation has a total market value (according to its stock price and number of shares outstanding) of $500 million. If its current net income is $10 per share and it has 1 million shares outstanding, what is the value of its P/E ratio?
500
50
10
100
Question 14
A company has $1 million in sales last year, $1.5 million in sales this year, and projected net income of $250,000. It has $5 million of its assets tied to sales, $3 million in sale affected liabilities, and a retention ratio of 0.3. What is its AFN?
$23,425,000
$925,000
$9,992,500
$9,925,000
Question 15
Which of the following is the correct order of steps when performing a forecast related to a company's performance?
Assess market price, assess cost, perform sales forecast, multiply by unit price, determine profit.
Perform sales forecast, assess market price, assess cost, multiply by unit price, determine profit.
Perform sales forecast, multiply by unit price, assess market price, assess cost, determine profit.
Determine profit, assess market price, assess cost, perform sales forecast, and multiply by unit price.
Question 16
Which of the following statements correctly defines a component of Cost of Goods Sold?
All overhead costs are associated with production activities.
All of these answers.
Parts, Raw Materials, and supplies used are all physical objects that go into making a good.
Labor costs are the wages paid to employees who spend their time working directly on the product.
Question 17
A company wants to have $5 million in sales with $1 million in profit. It will have fixed costs of $3 million. Each unit of its product sells for $20.How much contribution per unit must the company have to meet its goals?
$16
$0.79
$1.60
$8
Question 18
A company is considering merging with another business. It is planning on preparing a pro forma income statement. Which of the following should be included in the pro forma statement?
If the merged company will have increased Research & Development (R&D) expenses.
How much the company's revenues will increase due to the merger.
How much the merged company's income tax expense will increase
All of these answers.
Question 19
Which of the following statements regarding pro forma financial statements is correct?
Pro forma balance sheets should focus on assets only.
Pro forma statements are used quarterly to project future financial activity.
Pro form statements summarize the projected future status of a company based on current statements.
All of these answers.
Question 20
A company wants to increase the amount of time in its disbursement cycle. Which of the following is a valid way to do that?
Pay for purchases using checks.
Use credit cards as often as possible.
Mail payment to suppliers for contractual obligations.
All of these answers.