Question 1

You are cautiously bullish on the common share of the Wildwood Corporation over the next several months. The current price of the share is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes:
 Ignoring commissions, the cost to establish the bull money spread with calls would be ________.
A) $1 050
B) $650
C) $400
D) $400 income rather than cost

Accepted Answer

B

Question 2

An investor purchases a long call at a price of $2.50. The expiration price is $35.00. If the current share price is $35.10, what is the break-even point for the investor?
A) $32.50
B) $35.00
C) $37.50
D) $37.60

Accepted Answer

The break-even point for a long call option is the strike price plus the premium paid. Since the premium is $2.50, the break-even point is $35.00 + $2.50 = $37.50.

Question 3

Consider the following information relating to Interceptors Ltd.  What must cash flow from financing have been in 2008 for Interceptors Ltd.?
A) $5
B) $28
C) $30
D) $33

Accepted Answer

D

Question 4

Consider the following information relating to Interceptors Ltd.  Based on the cash flow data in the table, which of the following statements is/are correct?
I. This firm appears to be a good investment because of its steady growth in cash.
II. This firm has only been able to generate growing cash flows by borrowing or selling equity to offset declining operating cash flows.
III. Financing activities have been increasingly important for this firm's operations, at least in the short run.
A) I only
B) II and III only
C) II only
D) I and II only

Accepted Answer

The answer of Consider the following information relating to Interceptors...

Question 5

A firm has a tax burden of 0.7, a leverage ratio of 1.3, an interest burden of 0.8, and a return on sales ratio of 10%. The firm generates $2.28 in sales per dollar of assets. What is the firm's ROE?
A) 12.4%
B) 14.5%
C) 16.6%
D) 17.8%

Accepted Answer

The firm's Return on Equity (ROE) can be calculated using the extended DuPont equation: ROE = (Sales/Assets) * (Profit/Sales) * (Earnings Before Tax/Earnings Before Interest and Tax) * (Net Income/Earnings Before Tax) * (Assets/Equity). Plugging in the given values: ROE = 2.28 * 10% * 0.8 * 0.7 * 1.3 = 16.6%.

Question 6

The financial statements of Burnaby Mountain Trading Company are given below  .
Note: The common shares are trading in the share market for $27 each.
Refer to the financial statements of Burnaby Mountain Trading Company. The firm's current ratio for 2008 is ________.
A) 1.30
B) 1.50
C) 1.69
D) 2.83

Accepted Answer

11ee763a_a7b8_0608_90da_cd476671410b_TB10008_00

Question 7

The financial statements of Burnaby Mountain Trading Company are given below.
 Note: The common shares are trading in the share market for $27 each.
Refer to the financial statements of Burnaby Mountain Trading Company. The firm's quick ratio for 2008 is ________.
A) 1.30
B) 1.50
C) 1.69
D) 2.83

Accepted Answer

11ee763a_a7b8_060a_90da_814de46bf87f_TB10008_00

Question 8

The financial statements of Burnaby Mountain Trading Company are given below.
 Note: The common shares are trading in the share market for $27 each.
Refer to the financial statements of Burnaby Mountain Trading Company. The firm's leverage ratio for 2008 is ________.
A) 1.30
B) 1.50
C) 1.69
D) 2.83

Accepted Answer

11ee763a_a7b8_2d1c_90da_9d3070867902_TB10008_00

Question 9

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013.
 What is the net cash provided by operating activities of Haven Hardware?
A) ($30 000)
B) $220 000
C) $320 000
D) $780 000

Accepted Answer

11ee763a_a7b8_2d1e_90da_1bffd5d9d363_TB10008_00

Question 10

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013.
 What is the net cash provided by or used in investing activities of Haven Hardware?
A) ($12 000)
B) ($62 000)
C) $12 000
D) $164 000

Accepted Answer

11ee763a_a7b8_2d20_90da_fd541e2fe610_TB10008_00

Question 11

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013.
 What is the net cash provided by or used in financing activities of Haven Hardware?
A) ($10 000)
B) ($120 000)
C) $10 000
D) $120 000

Accepted Answer

11ee763a_a7b8_5432_90da_a5aa13e1d036_TB10008_00

Question 12

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013.
 What is the net increase or decrease in cash for Haven Hardware for 2013?
A) ($94 000)
B) ($88 000)
C) $88 000
D) $188 000

Accepted Answer

The answer of Use the following cash flow data of...

Question 13

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013.
 What is the cash at the end of 2013 for Haven Hardware?
A) $6 000
B) $94 000
C) $736 000
D) $188 000

Accepted Answer

The answer of Use the following cash flow data of...

Question 14

Look at the following table of data for Key Biscuit Company:
 What must have caused the firm's ROE to drop?
A) The firm began using more debt as a percentage of financing.
B) The firm began using less debt as a percentage of financing.
C) The compound leverage ratio was less than 1.
D) The operating ROA was declining.

Accepted Answer

The answer of Look at the following table of data...

Question 15

The tax burden of the firm is .4, the interest burden is 0.65, the return on sales is 0.05, the asset turnover is 0.90, and the leverage ratio is 1.35. What is the ROE of the firm?
A) 1.58%
B) 5.68%
C) 12.20%
D) 13.33%

Accepted Answer

The answer of The tax burden of the firm is...

Quiz 4: Financial Statement Analysis, Options and Risk Management

An investor purchases a long call at a price of $2.50. The expiration price is $35.00. If the current share price is $35.10, what is the break-even point for the investor?

Consider the following information relating to Interceptors Ltd. What must cash flow from financing have been in 2008 for Interceptors Ltd.?

A firm has a tax burden of 0.7, a leverage ratio of 1.3, an interest burden of 0.8, and a return on sales ratio of 10%. The firm generates $2.28 in sales per dollar of assets. What is the firm's ROE?

The financial statements of Burnaby Mountain Trading Company are given below . Note: The common shares are trading in the share market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's current ratio for 2008 is ________.

The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the share market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's quick ratio for 2008 is ________.

The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the share market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's leverage ratio for 2008 is ________.

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013. What is the net cash provided by operating activities of Haven Hardware?

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013. What is the net cash provided by or used in investing activities of Haven Hardware?

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013. What is the net cash provided by or used in financing activities of Haven Hardware?

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013. What is the net increase or decrease in cash for Haven Hardware for 2013?

Use the following cash flow data of Haven Hardware for the year ended 31 December 2013. What is the cash at the end of 2013 for Haven Hardware?

Look at the following table of data for Key Biscuit Company: What must have caused the firm's ROE to drop?

The tax burden of the firm is .4, the interest burden is 0.65, the return on sales is 0.05, the asset turnover is 0.90, and the leverage ratio is 1.35. What is the ROE of the firm?