Question 1

The operating break-even sales level is sensitive to all of the following variables except:

Accepted Answer

The operating break-even sales level is calculated based on the relationship between fixed operating costs, sales price per unit, and variable operating cost per unit. Interest expenses are not included in the calculation and hence are not sensitive to operating break-even sales level.

Question 2

Which of the following is not a variable cost?

Accepted Answer

Rent is a fixed cost as it remains constant regardless of the level of production or sales. Direct materials, direct labor, and delivery costs are all variable costs as their costs will increase or decrease depending on the level of production or sales.

Question 3

_____________ costs are a function of time (not sales)and are generally contractual.

Accepted Answer

None of the options provided correctly describe costs that are a function of time and generally contractual. The correct term for such costs is "fixed costs."

Question 4

Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0.Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0.Based on this limited information firm ________ appears to be in ________ debt management position than firm ________.

Accepted Answer

The answer of Firm A has a total debt to...

Question 5

_____________ costs are a function of quantity sold,not time.

Accepted Answer

Variable costs vary with the quantity of goods or services produced or sold. Hence, the cost is not dependent on time, and choice D is the best answer. Fixed costs are constant regardless of the quantity sold, and semi-variable costs have both fixed and variable elements. Operating costs are the costs associated with running a business, including fixed and variable costs. Therefore, they cannot be chosen based on the given information. Hence, the answer is D.

Question 6

_____________ costs are a function of quantity sold,not time.

Accepted Answer

Variable costs, not listed among the options, are the costs that change with the quantity sold.

Question 7

The _______________ ratio is computed as earnings before interest and taxes divided by interest expense:

Accepted Answer

The interest coverage ratio is calculated as earnings before interest and taxes (EBIT) divided by interest expense. This ratio evaluates a company's ability to pay interest on its debt obligations. A higher ratio indicates that the company is generating enough earnings to cover its interest expenses and is a positive sign for creditors and investors.

Question 8

If a firm has no debt and pays no taxes,then the firm's operating profit margin will be ___________ the firm's net profit margin.

Accepted Answer

Operating profit margin is calculated as operating profit divided by revenue,
Net profit margin is calculated as net profit divided by revenue,
If the firm has no debt and pays no taxes, there will not be any interest expense or taxes to be deducted from the operating profit to arrive at net profit. Therefore, operating profit will be the same as net profit, resulting in the same profit margin for both.

Question 9

The profitability ratio that measures the return that shareholders earned on the equity they invested in the firm is the:

Accepted Answer

Return on equity measures the return that shareholders earned on the equity they invested in the firm. It is calculated by dividing net income by shareholders' equity. Operating profit margin measures the profitability of the company's core business operations, while net profit margin measures the proportion of sales that is left over after all expenses have been paid. Return on assets measures the return that the company earned on its total assets, regardless of how those assets were financed.

Question 10

Which one of the following is not a basic component of the DuPont method of ratio analysis?

Accepted Answer

The basic components of the DuPont method of ratio analysis are profit margin, total asset turnover, and equity multiplier. Liquidity margin is not a component of the DuPont method, which focuses on analyzing the sources of a company's return on equity.

Question 11

Cost-volume-profit analysis can be used to estimate the firm's operating profits at different levels of:

Accepted Answer

The answer of Cost-volume-profit analysis can be used to estimate...

Question 12

A financial technique that involves dividing various financial statement numbers into one another is called:

Accepted Answer

Ratio analysis involves dividing various financial statement numbers into one another to calculate different ratios that can help in analyzing a company's financial health, efficiency, profitability, and liquidity. Trend analysis involves comparing the same financial statement numbers over time, cross-sectional analysis involves comparing a company's financial performance with that of its competitors or peers, and percent of sales analysis involves calculating different expenses as a percentage of sales revenue.

Question 13

Which of the following is not a variable cost?

Accepted Answer

The answer of Which of the following is not a...

Question 14

Which of the following is not a variable cost?

Accepted Answer

Both direct materials and direct labor are typically considered variable costs as they vary directly with the level of production. Delivery costs and commissions may also be variable costs depending on the specific circumstances. Therefore, the correct answer is E - all of the above are variable costs.

Question 15

The degree of operating leverage (DOL)can be measured by the percent change in operating income (EBIT)divided by percent change in:

Accepted Answer

The degree of operating leverage (DOL) is a measure of how sensitive operating income (EBIT) is to a change in sales. It is computed by dividing the percent change in EBIT by the percent change in unit sales. Therefore, the best choice is C - unit sales. A and D are incorrect because fixed and total costs are not directly related to operating leverage, while B is incorrect because the DOL uses EBIT, which is impacted by changes in both fixed and variable costs.

Question 16

_____________ costs are a function of time (not sales)and are generally contractual.

Accepted Answer

Fixed costs do not change with changes in sales volume but rather are a function of time or contractual obligations. Examples of fixed costs include rent, salaries, and insurance premiums.

Question 17

The operating break-even sales level is sensitive to all of the following variables except:

Accepted Answer

The answer of The operating break-even sales level is sensitive...

Question 18

Earnings before interest and taxes (EBIT)is another way of describing:

Accepted Answer

EBIT stands for earnings before interest and taxes, which is a measure of a company's operating profits. It is calculated by subtracting operating expenses (excluding interest and income tax expenses) from total revenue. Therefore, choice A) operating profits is the best description of EBIT.

Question 19

If a firm has sales of $100,total expenses (including interest and taxes)of $50,has a stock that is selling at $50 per share and has 10 share of stock outstanding,then the firm has a P/E ratio of:

Accepted Answer

The P/E ratio is calculated by dividing the stock price by the earnings per share (EPS).

EPS = (Sales - Total expenses)/Total number of shares outstanding 
     = ($100 - $50)/10 
     = $5

Therefore, P/E ratio = Stock price/EPS 
                     = $50/$5 
                     = 10

Hence, the correct answer is C) 10.0.

Question 20

Which one of the following is not a basic element or component of the percentage of sales approach to long-term financial planning?

Accepted Answer

The basic elements of the percentage of sales approach include asset investment requirements, internally generated financing, and spontaneous increases in current liabilities. Automatic increases in cash inflows are not typically considered a component of this approach.

Quiz 14: Financial Analysis and Long-Term Financial Planning

The operating break-even sales level is sensitive to all of the following variables except:

Which of the following is not a variable cost?

_____________ costs are a function of time (not sales) and are generally contractual.

Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0.Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0.Based on this limited information firm appears to be in debt management position than firm .

_____________ costs are a function of quantity sold,not time.

_____________ costs are a function of quantity sold,not time.

The _______________ ratio is computed as earnings before interest and taxes divided by interest expense:

If a firm has no debt and pays no taxes,then the firm's operating profit margin will be ___________ the firm's net profit margin.

The profitability ratio that measures the return that shareholders earned on the equity they invested in the firm is the:

Which one of the following is not a basic component of the DuPont method of ratio analysis?

Cost-volume-profit analysis can be used to estimate the firm's operating profits at different levels of:

A financial technique that involves dividing various financial statement numbers into one another is called:

Which of the following is not a variable cost?

Which of the following is not a variable cost?

The degree of operating leverage (DOL) can be measured by the percent change in operating income (EBIT) divided by percent change in:

_____________ costs are a function of time (not sales) and are generally contractual.

The operating break-even sales level is sensitive to all of the following variables except:

Earnings before interest and taxes (EBIT) is another way of describing:

If a firm has sales of $100,total expenses (including interest and taxes) of $50,has a stock that is selling at $50 per share and has 10 share of stock outstanding,then the firm has a P/E ratio of:

Which one of the following is not a basic element or component of the percentage of sales approach to long-term financial planning?