Question 1

Kim has gathered the following information on a company. $$\begin{array} { l l } 
\hline \text { Sales } & \$ 640,000 \
\text { Dividends paid on } & \$ 18,000 \
\text { ordinary share } & \
\text { Net profit margin }&5 \%  \
\text { Number of shares } &128,000\
\text { outstanding }\
\hline
\end{array}$$ What is the amount of the earnings per share?

Accepted Answer

D

Question 2

The consumer electronics sector would be most significantly affected by

Accepted Answer

Developments in technology directly impact the consumer electronics sector by driving innovation, product development, and consumer demand.

Question 3

Some investment analysts believe that the market processes new information so well and so quickly that securities trade very close to their intrinsic values at all times. These analysts are said to be advocates of

Accepted Answer

The efficient markets hypothesis (EMH) suggests that financial markets are "informationally efficient," meaning that prices of securities reflect all available information at any point in time, making it difficult to consistently achieve higher returns than the overall market.

Question 4

Rising corporate profits are likely to have the greatest effect on which of the following industrial sectors?

Accepted Answer

Rising corporate profits often lead to increased investment in business equipment as companies look to expand operations and improve efficiency.

Question 5

Fundamental analysis involves the in- depth study of the

Accepted Answer

Fundamental analysis focuses on evaluating a company's financial health, including its financial statements, management, and market position, to determine its intrinsic value.

Question 6

Which one of the following statements concerning accounting reports is correct?

Accepted Answer

The statement of cash flows provides information about a company's cash inflows and outflows over a period, detailing sources and uses of cash.

Question 7

Which stage of an industry's growth cycle offers the greatest opportunity for an investor who is seeking capital gains?

Accepted Answer

During the rapid expansion stage, companies experience significant growth in sales and profits, leading to substantial increases in stock prices, which offers the greatest opportunity for capital gains.

Question 8

Marco's just reported an EPS of $1.68 on revenues of $440 million. The company has 12 million shares outstanding. Total assets are $280 million, current liabilities equal $48 million, and long- term debt is $112 million. Net fixed assets are worth $230 million. Given this information, which one of the following statements is correct?

Accepted Answer

Net working capital is calculated as current assets minus current liabilities. Current assets can be found by subtracting net fixed assets from total assets, which gives $50 million. Thus, net working capital is $50 million - $48 million = $2 million.

Question 9

A company has sales of $640,000, net profit after taxes of $23,000, and a total asset turnover of 2.5. What is the return on assets?

Accepted Answer

The answer of A company has sales of $640,000, net...

Question 10

Increases in either interest rates or taxes tend to

Accepted Answer

Increases in interest rates or taxes generally lead to a contraction in economic activity as they reduce consumer spending and business investment.

Question 11

Which one of the following statements is correct?

Accepted Answer

Share prices are often used as a leading indicator to predict changes in the economy, as they reflect investor expectations about future economic conditions.

Question 12

The government has an expansionary economic policy when it

Accepted Answer

An expansionary economic policy involves increasing government spending to stimulate economic growth.

Question 13

A company has 2 million shares outstanding. Annual sales are $26 million. The net profit margin is 8% and the dividend payout ratio is 40%. Currently the stock trades at $17.68 per share. Given this information, the company has a P/E ratio of

Accepted Answer

The answer of A company has 2 million shares outstanding....

Question 14

The stage in an industry's growth cycle in which product acceptance is spreading, investors can foresee the industry's future, and overall economic variables have little to do with the industry's overall performance, is known as the

Accepted Answer

The rapid expansion stage is characterized by widespread product acceptance, predictable industry future, and minimal impact from overall economic variables.

Question 15

Rio Tinto's debt to equity ratio is .54 while David Jone's is .68. By comparing these ratios we can conclude

Accepted Answer

Debt to equity ratios can vary significantly across different industries, so comparing them directly without considering industry norms provides limited insight.

Question 16

The measure that indicates how efficiently assets are being used to support sales is called the

Accepted Answer

Total asset turnover measures how efficiently a company uses its assets to generate sales.

Question 17

On March 31, Adolpha, Inc. reported the following information on its financial statements. $\begin{array}{llcc}
  \text { Total current } &\$210,687  \
 \text { assets } &\
 \text {Total long-  } &\$1,063,432\
 \text { term assets } &\
 \text { Total current } &\$337,609\
 \text {liabilities  } &\
 \text { Total long-  } &\$1,002,643\
 \text {  term debt} &\
\end{array}$
 What is the available net working capital for Adolpha, Inc.?

Accepted Answer

The answer of On March 31, Adolpha, Inc. reported the...

Question 18

Generally, the market price of a share is

Accepted Answer

The market price of a share is often above its book value due to factors like investor sentiment, future growth prospects, and market conditions, which can drive the price higher than the accounting value of the company's net assets.

Question 19

Cash flow from operations

Accepted Answer

Cash flow from operations represents the cash generated from the company's core business activities, indicating its ability to generate sufficient cash to maintain and grow operations.

Question 20

A company has annual sales of $160 million, a net profit margin of 4%, and total assets of $90 million. It carries $10 million in accounts receivable, $25 million in inventory, has $55 million in total debt, and 5 million shares of common stock outstanding. Based on this information, the company's return on equity (ROE) is

Accepted Answer

The answer of A company has annual sales of $160...

Quiz 7: Analysing Shares