Deck 8: Analysis of Financial Statements

Question 1

What was BMC'S interest coverage for 2014?

A) 6.82
B) 3.04
C) 2.74
D) 2.04
E) 1.41

Answer 1

B

Question 2

Which ratio is considered an internal liquidity ratio?

A) Total asset turnover
B) Net fixed asset turnover
C) Receivables turnover
D) Equity turnover
E) Inventory turnover

Answer 2

C

Question 3

Which of the following statements regarding financial risk and business risk is true?

A) The acceptable level of financial risk for a firm depends on its business risk.
B) A firm with a greater degree of business risk has the ability to take on more debt.
C) A firm with a greater degree of financial risk typically takes on less business risk.
D) Financial risk and business risk are both important but they are not related in any way.
E) Financial risk is more important for small firms and business risk is more important for large firms.

Answer 3

A

Question 4

Which of the following is not a use of financial ratios?

A) Stock valuation
B) Assigning credit quality ratings on bonds
C) Predicting insolvency
D) Identification of internal corporate variables that affect a stock's systematic risk
E) None of the above (that is, all are uses of financial ratios)

Question 5

The five major classes of ratios include the following, except

A) internal liquidity.
B) risk analysis.
C) growth analysis.
D) market performance.
E) operating performance.

Question 6

Operating performance is divided into which two subcategories of ratios?

A) efficiency and profitability
B) efficiency and debt
C) profitability and growth
D) debt and equity
E) liquidity and leverage

Question 7

An estimate of the discounted value of future lease payments can be obtained by:

A) Discounting future lease payments at the firm's cost of debt. b. Discounting future lease payments at the firm's cost of capital.
C) Applying a multiple to forthcoming minimum lease payments.
D) a or b.
E) a or c.

Question 8

Which equation is valid?

A) g = Percent of earnings retained ÷ Return on equity
B) g = Return on equity ÷ Percent of earnings retained
C) g = Return on equity ÷ Return on total assets
D) g = Percent of earnings retained x Return on equity
E) g = Total assets x Return on total assets

Question 9

What was BMC'S return on equity in 2014?

A) 4.8%
B) 5.9%
C) 6.7%
D) 8.3%
E) 11.6%

Question 10

What was BMC'S total asset turnover for 2014?

A) 0.23
B) 1.28
C) 1.46
D) 0.87
E) 0.68

Question 11

What was BMC'S quick ratio for 2014?

A) 1.72
B) 1.37
C) 1.02
D) 0.85
E) 0.55

Question 12

The market liquidity of a security can be measured using

A) Trading turnover. b. Bid-Ask spread.
C) Price of the security.
D) a and b.
E) b and c.

Question 13

The practice of comparing the firm to a subset of industry firms comparable in size or characteristics is referred to as

A) common size analysis
B) cross-sectional analysis
C) DuPont analysis
D) proforma analysis
E) time-series analysis

Question 14

A common-size balance sheet expresses all balance sheet items

A) as a percentage of Current Assets.
B) as a percentage of Fixed Assets.
C) as a percentage of Total Assets.
D) as a percentage of Net Income.
E) as a percentage of Sales.

Question 15

Which of the following factors would be indicative of a high quality balance sheet?

A) Book value is greater than market value
B) The presence of off-balance sheet liabilities
C) Market value is greater than book value
D) Very little unused borrowing capacity
E) None of the above