Question 1

Fundamental analysis uses

Accepted Answer

Fundamental analysis focuses on evaluating a company's intrinsic value by examining related economic, financial, and other qualitative and quantitative factors, including earnings and dividend prospects. Relative strength and price momentum are technical analysis tools, not fundamental analysis.

Question 2

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's asset turnover ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 3

__________ is a false statement.

Accepted Answer

The answer of __________ is a false statement.
...

Question 4

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's average collection period for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 5

Comparability problems arise because

Accepted Answer

Comparability problems in financial statements can arise because firms may use different accounting principles and because inflation can affect firms differently, depending on the accounting conventions they use. This makes it challenging to compare financial statements accurately across different companies.

Question 6

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's return on sales ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 7

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's current ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 8

Which of the following would best explain a situation where the ratio of net income/total equity of a firm is higher than the industry average, while the ratio of net income/total assets is lower than the industry average?

Accepted Answer

The firm having a higher net income/total equity ratio than the industry average while having a lower net income/total assets ratio suggests that the firm is using more debt in its capital structure. This is because the equity multiplier (total assets/total equity) is higher, indicating a higher proportion of assets financed by debt. This does not directly relate to the firm's net profit margin or asset turnover but rather to its financial leverage, which is why option D is correct.

Question 9

What best explains why a firm's ratio of long-term debt/total capital is lower than the industry average, while the ratio of income before interest and taxes/debt interest charges is higher than the industry average?

Accepted Answer

The answer of What best explains why a firm's ratio...

Question 10

__________ best explains a ratio of sales/average net fixed assets that exceeds the industry average.

Accepted Answer

A ratio of sales to average net fixed assets that exceeds the industry average suggests that the firm is generating more sales per dollar of net fixed assets than its competitors. This can be due to having a substantial amount of old plant and equipment, which would have been depreciated over time, lowering the book value of these assets and thus increasing the ratio.

Question 11

One problem with comparing financial ratios prepared by different reporting agencies is

Accepted Answer

Agencies may have different policies regarding what items are included in their calculations of financial ratios, leading to inconsistencies when comparing ratios prepared by different agencies.

Question 12

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's leverage ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 13

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's quick ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 14

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's inventory turnover ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 15

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's P/E ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 16

The financial statements of Midwest Tours are given below  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's return on equity ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 17

The financial statements of Midwest Tours are given below.|  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's times interest earned ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Question 18

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense. During periods of high inflation, the level of reported depreciation tends to __________ income, and the level of interest expense reported tends to __________ income.

Accepted Answer

During high inflation, historical cost depreciation understates the replacement cost of assets, thus overstating income. Interest expense, based on historical debt, understates the real cost of borrowing, thus understating income.

Question 19

__________ is a true statement.

Accepted Answer

During periods of inflation, LIFO (Last-In, First-Out) results in older, lower-cost inventory remaining on the balance sheet, making it less representative of current market values compared to FIFO (First-In, First-Out), which reflects more recent, higher costs.

Question 20

The financial statements of Midwest Tours are given below.  Note: The common shares are trading in the stock market for $36 each.
Refer to the financial statements of Midwest Tours. The firm's fixed asset turnover ratio for 2009 is

Accepted Answer

The answer of The financial statements of Midwest Tours are...

Quiz 19: Financial Statement Analysis

Fundamental analysis uses

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's asset turnover ratio for 2009 is

__________ is a false statement.

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's average collection period for 2009 is

Comparability problems arise because

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's return on sales ratio for 2009 is

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's current ratio for 2009 is

Which of the following would best explain a situation where the ratio of net income/total equity of a firm is higher than the industry average, while the ratio of net income/total assets is lower than the industry average?

What best explains why a firm's ratio of long-term debt/total capital is lower than the industry average, while the ratio of income before interest and taxes/debt interest charges is higher than the industry average?

__________ best explains a ratio of sales/average net fixed assets that exceeds the industry average.

One problem with comparing financial ratios prepared by different reporting agencies is

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's leverage ratio for 2009 is

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's quick ratio for 2009 is

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's inventory turnover ratio for 2009 is

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's P/E ratio for 2009 is

The financial statements of Midwest Tours are given below Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's return on equity ratio for 2009 is

The financial statements of Midwest Tours are given below.| Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's times interest earned ratio for 2009 is

The level of real income of a firm can be distorted by the reporting of depreciation and interest expense. During periods of high inflation, the level of reported depreciation tends to income, and the level of interest expense reported tends to income.

__________ is a true statement.

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm's fixed asset turnover ratio for 2009 is