- Description
FIN 370 Week 1 Practice: Finance and Financial Statement Analysis Quiz
Complete the Week 1 “Practice: Finance and Financial Statement Analysis Quiz” in Connect®.
Note: You have unlimited attempts available to complete practice assignments. The highest scored attempt will be recorded.
These assignments have earlier due dates, so plan accordingly.
Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.
Which of the following is the firm’s highest-level financial manager?
Multiple Choice
chief executive officer
corporate governance
chief financial officer
board of directors
Which of these must effectively distribute capital between investors and companies?
Multiple Choice
companies
individuals
international investors
financial institutions
Which of the following statements is correct?
Multiple Choice
Financial managers double-check the accountant’s statements.
Accountants are focused on what happened in the past.
Both accountants and financial managers use total quality management systems to standardize data.
Financial managers are focused on what happened in the past.
This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow.
Multiple Choice
investment
real asset
financial asset
financial markets
The portion of a company’s profits that are kept by the company rather than distributed to the stockholders as cash dividends is referred to as
Multiple Choice
institutional investment.
restricted earnings.
venture capital.
retained earnings.
A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. This is called
Multiple Choice
risk.
options.
standard deviation.
coefficient of variation.
Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations?
Multiple Choice
market instruments
financial markets
asset classes
investments
What is the difference in perspective between finance and accounting?
Multiple Choice
ownership
timing
liability
risk
This subarea of finance is important for adapting to the global economy.
Multiple Choice
financial management
financial institutions and markets
investments
international finance
For corporations, maximizing the value of owner’s equity can also be stated as
Multiple Choice
maximizing net income.
maximizing retained earnings.
maximizing the stock price.
maximizing earnings per share.
Which of the following is NOT a function of the board of directors?
Multiple Choice
evaluate the CEO
design compensation contracts for the CEO
provide reports to the auditors
hire the CEO
This is the set of laws, policies, incentives, and monitors designed to handle the issues arising from the separation of ownership and control.
Multiple Choice
corporate governance
defined benefit plan
invisible hand
agency theory
Which of the following statements is incorrect?
Multiple Choice
Most sole proprietors raise money by borrowing from banks.
S corporations are considered a hybrid organization.
An advantage of sole proprietorships is that the owner has complete control.
Partnerships have unlimited liability.
Agency problems exist in which forms of business ownership?
Multiple Choice
partnership
sole proprietorship
corporation
S corporation
An angel investor differs from a venture capitalist because of the
Multiple Choice
investment time frame.
voting rights.
type of investment.
size of investment.
Which statement is incorrect regarding hybrid organizations?
Multiple Choice
They offer single taxation.
They offer limited risk to the owners.
They offer the same type of control as a sole proprietorship.
All of these choices are correct.
From a taxation perspective, the form of business organization with the highest business level taxes is the
Multiple Choice
S corporation.
corporation.
sole proprietorship.
partnership.
Corporate stakeholders include all of the following EXCEPT
Multiple Choice
employees.
suppliers.
shareholders.
auditors.
From the perspective of ownership risk, the best form of business organization is the
Multiple Choice
sole proprietorship.
partnership.
corporation.
S corporation.
Which of the following is NOT considered a hybrid organization?
Multiple Choice
all of these choices are correct.
limited partnership
S corporation
limited liability company
limited liability partnership
Which of these is the system of incentives and monitors that tries to overcome the agency problem?
Multiple Choice
corporate Governance
checks and Balances
Security Exchange Commission
board of Directors
When determining a form of business organization, all of the following are considered EXCEPT
Multiple Choice
the physical location of the business.
who owns the firm.
the tax ramifications.
the owners’ risks.
All of the following are an example of a fiduciary relationship EXCEPT
Multiple Choice
a financial advisor advises her clients.
the shareholder elects a board member.
a bank employee manages deposits.
a CEO manages the firm.
Restricted stock is
Multiple Choice
a special type of stock that can be converted into corporate bonds after a specific amount of time has elapsed.
a special type of stock that is not transferable from the current holder to others until specific conditions are satisfied.
a special type of stock that is a result of offering an employee stock ownership plan.
Which of the following refer to ratios that measure the relationship between a firm’s liquid (or current) assets and its current liabilities?
Multiple Choice
liquidity
internal-growth
cross-section
market value
Which of the following measures the number of days accounts receivable are held before the firm collects cash from the sale?
Multiple Choice
accounts receivable turnover
average payment period
accounts payable turnover
average collection period
Which ratio measures the number of dollars of operating earnings available to meet the firm’s interest dollars and other fixed charges?
Multiple Choice
fixed-charge coverage ratio
basic earning power
times interest earned
ROA
Which ratio measures the operating return on the firm’s assets irrespective of financial leverage and taxes?
Multiple Choice
profit margin
basic earning power ratio
operating leverage return
return on assets
A firm has EBIT of $1,000,000 and depreciation expense of $400,000. Fixed charges total $600,000. Interest expense totals $70,000. What is the firm’s fixed-charge coverage ratio?
Multiple Choice
2.45 times
1.67 times
1.00 times
2.33 times
Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets?
Multiple Choice
debt management ratios
financial ratios
liquidity ratios
equity ratios
A strong liquidity position means that
Multiple Choice
the firm is able to meet its short-term obligations.
the firm pays out a large portion of its net income in the form of dividends.
the firm uses little debt in its capital structure.
the firm pays its creditors on time.
Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities?
rev: 08_14_2018_QC_CS-133354
Multiple Choice
internal-growth
current
cross-section
quick or acid-test
A firm has EBIT of $300,000 and depreciation expense of $12,000. Fixed charges total $44,000. Interest expense totals $7,000. What is the firm’s cash coverage ratio?
Multiple Choice
7.09 times
3.76 times
7.25 times
4.91 times
Incorrect
Which of the following measures the number of dollars of sales produced per dollar of fixed assets?
Multiple Choice
fixed asset to working capital ratio
fixed asset management ratio
sales to working capital ratio
fixed asset turnover ratio
The term “capital structure” refers to
Multiple Choice
the amount of current versus fixed assets on the balance sheet.
the amount of long-term debt versus equity on the balance sheet.
the amount of current versus long-term debt on the balance sheet.
A firm reported year-end cost of goods sold of $10 million. It listed $2 million of inventory on its balance sheet. Using a 365-day year, how many days did the firm’s inventory stay on the premises?
Multiple Choice
73 days
2 days
20 days
18.25 days
Tops N Bottoms Corp. reported sales for 2018 of $50 million. Tops N Bottoms listed $4 million of inventory on its balance sheet. Using a 365-day year, how many days did Tops N Bottoms’ inventory stay on the premises? How many times per year did Tops N Bottoms’ inventory turn over?
Multiple Choice
29.2 days, 0.0345 times, respectively
29.2 days, 12.5 times, respectively
0.08 days, 12.5 times, respectively
12.5 days, 29.2 times, respectively
Which ratio measures how many days inventory is held before the final product is sold?
Multiple Choice
total asset turnover
inventory turnover
days’ sales in inventory
inventory intensity ratio
Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm’s debt?
Multiple Choice
times interest earned
ROA
cash coverage ratio
fixed-charge coverage ratio
You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $100 million in assets with $90 million in debt and $10 million in equity. LotsofEquity, Inc. finances its $100 million in assets with $10 million in debt and $90 million in equity. What are the debt ratio, equity multiplier, and debt-to-equity ratio for the two firms?
Multiple Choice
LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11 times, 0.1111 times, respectively
LotsofDebt: 10 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 90 percent, 10 times, 9 times, respectively
LotsofDebt: 90 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 10 percent, 10 times, 9 times, respectively
LotsofDebt: 10 percent, 10 times, 9 times, respectively; and LotsofEquity: 90 percent, 1.11 times, 0.1111 times, respectively
A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance?
Multiple Choice
$759,021
$619,304
$551,781
$692,098
Tina’s Track Supply’s market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina’s Track Supply’s common stock is currently selling at $100 per share, what is the book value per share and earnings per share?
Multiple Choice
$9.5238, $22.2222, respectively
$1,050, $450, respectively
$450, $1,050, respectively
$22.2222, $9.5238, respectively
Bree’s Tennis Supply’s market-to-book ratio is currently 9.4 times and PE ratio is 20 times. If Bree’s Tennis Supply’s common stock is currently selling at $20.50 per share, what is the book value per share and earnings per share?
Multiple Choice
$192.70, $410.00, respectively
$1.025, $2.1809, respectively
$410.00, $192.70, respectively
$2.1809, $1.025, respectively
An investor wanting large returns will be interested in companies that have
Multiple Choice
high current ratios.
high times interest earned.
high ROEs.
high ROAs.
Which of the following measures the operating return on the firm’s assets, irrespective of financial leverage and taxes?
Multiple Choice
return on equity
basic earnings power ratio
return on assets
profit margin
For publicly traded firms, which of these ratios measure what investors think of the company’s future performance and risk?
Multiple Choice
liquidity ratios
profitability ratios
market value ratios
price value ratios
According to the list provided in the textbook, which of the following is NOT one of the cautions in using ratios to evaluate firm performance?
rev: 07_10_2017_QC_CS-93252
Multiple Choice
The firm has different accounting procedures.
The firm has seasonal cash flow differences.
The firm had a one-time event.
The firm has a different capital structure.
To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks?
Multiple Choice
competitive analysis
time series analysis
cross-industry analysis
time-industry analysis
Last year Mocha Java, Inc. had an ROA of 10 percent, a profit margin of 5 percent, and sales of $25 million. What is Mocha Java’s total assets?
Multiple Choice
$0.125m.
$1.25m.
$12.5m.
$12m.
Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent. What is the sustainable growth rate?
Multiple Choice
50.00 percent
2.04 percent
44.44 percent
1.11 percent