1) All of the following are true regarding a high quality balance sheet except:
A. It should portray the economic resources that can be reasonably expected to generate future economic benefits.
B. It should provide a complete and fair portrayal of all of the firm's obligations at a point in time, including the present value of long-term liabilities for future payments.
C. It should minimize measurement error and bias.
D. It should be optimistic in terms of accounting numbers.
2) On a Cash Flow Statement, Operating activities include:
A. Establishing a line of credit.
B. Decreasing Accounts Payable.
C. Short Term Debt repayment.
D. Purchasing a company.
3) The Indirect Method of calculating Cash Flow:
A. Begins with Net Income.
B. Begins with Revenue.
C. Shows cash collections from customers.
D. Is used much less frequently than the Direct Method.
4) On December 31, 2011, Inventory for Company X was $30,000. On December 31, 2012 the Inventory amount was $15,000. During 2012, the change in Inventory represented:
A. A $15,000 Operating Outflow.
B. A $15,000 Operating Inflow.
C. A $45,000 Operating Inflow.
D. A $45,000 Operating Outflow.
5) The current ratio of Company X is 3.0 times. Company X has working capital of $20,000. Total Current Assets for Company X are:
A. $6,667
B. $10,000
C. $30,000
D. $60,000
6) Company X reports $200,000 in sales of Widgets in 2012. The Costs of Goods sold for these Widgets is $90,000. All other operating expenses (SG&A, R&D, Depreciation, Other, etc.) are $50,000. Which of the following is the correct representation of the profitability ratios:
A. Gross Profit Margin 45%, Operating Margin 30%.
B. Gross Profit Margin 55%, Operating Margin 30%.
C. Gross Profit Margin 45%, Operating Margin 20%.
D. Gross Profit Margin 55%, Operating Margin 20%.
7) Sales for Company Y are $100,000 in 2012 and the net profit margin is 9.0%. The Return on Equity is 20%. What is the dollar value of Equity.
A. $ 18,000
B. $ 45,000
C. $ 90,000
D. $ 444,444
8) If the Cost of Sales for Company Z is $912,500 for the 2012 year, and the Days Inventory Held is 25. The value of the Inventory at the end of 2012 is:
A. $ 62,500
B. $ 36,500
C. $ 3,042
D. $ 2,500
9) Which of the following is likely to cause the largest Cash Outflow:
A. Sale of a 30 Story Office building owned by the company for $120 million.
B. Purchase a $20,000 copy machine.
C. Openings a $50,000 line of credit.
D. An acquisition of a competitor for $1.0 million in stock.
10) A company comparing the use of Straight Line Depreciation (SLD) and Accelerated Depreciation (DDB) in the first year subsequent to the purchase of a capital asset would find:
A. The Fixed Asset Turnover ratio is highest using SLD.
B. The Fixed Asset Turnover ratio is highest using DDB.
C. No difference in the Fixed Asset Turnover ratio.
D. The Total Asset Turnover ratio is highest using SLD.
11) Assuming net income and shareholders equity are positive, and at least $1 in liabilities, the Return on Investment is:
A. Always higher than the Return on Equity.
B. Always equal to the Return on Equity.
C. Sometimes equal to the Return on Equity.
D. Always lower than the Return on Equity.
12) Company ABC has a market capitalization of $750 million, Book Value (Shareholder's Equity) Per share of $15 and net income of $25 million. If the stock is currently trading at $30. The Return on Equity is:
A. 3.3%
B. 6.7%
C. 9.3%
D. 50.0%