Question 1

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions:
   Refer to the information for Mobile Company.Mobile's days receivables outstanding at the end of 2010 was
A) 43.20 days
B) 40.50 days
C) 45.25 days
D) 8.50 days

Accepted Answer

A

Question 2

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions:
   Refer to the information for Mobile Company.Days of other financing required by Mobile at the end of 2010 would be
A) 54.36 days
B) (54.36 days)
C) 102.94 days
D) (5.27 days)

Accepted Answer

A

Question 3

Market equity beta measures the covariability of a firm's returns with the return's of
A) all industry competitors in the market.
B) risk free securities.
C) all securities in the market.
D) all firms of comparable market value.

Accepted Answer

Market equity beta measures the covariability of a firm's returns with the returns of all securities in the market. It is typically calculated by regressing the returns of the firm against the returns of a market index, such as the S&P 500. This beta indicates the level of systematic risk associated with the firm's stock, which is important for determining the required return and cost of capital for the firm.

Question 4

One common problem with the current ratio is that it is susceptible to "window dressing." If prior to the end of the accounting period Saxon Company has a current ratio of 1.5 and management wishes to boost its current ratio it may decide to
A) pay off accounts payable prior to year end.
B) purchase more inventory on account.
C) purchase short-term investments with cash.
D) purchase more inventory with cash.

Accepted Answer

Paying off accounts payable prior to year end would increase the current ratio as it would decrease current liabilities and increase current assets, without affecting the operating cash flow. However, options B, C and D would all decrease the current ratio as they would either increase current liabilities or decrease current assets.

Question 5

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions:
   Refer to the information for Mobile Company.Mobile's 2010 Inventory Turnover ratio is
A) 7.46
B) 11.83
C) 6.16
D) 5.62

Accepted Answer

The answer of Mobile Company Mobile Company manufactures computer technology...

Question 6

Which of the following states of financial distress would be considered the most troubling for an investor or creditor?
A) failing to make a required interest payment on time
B) paying an accounts payable after the billing date
C) restructuring debt
D) defaulting on a principal payment on debt

Accepted Answer

Defaulting on a principal payment on debt is the most troubling state of financial distress for an investor or creditor. This means that the borrower is unable to meet one of the most important obligations of the debt, which could lead to a potential loss of principal for the investor or creditor. Failing to make a required interest payment on time is also a serious issue, but it is generally considered less severe than defaulting on a principal payment. Paying an accounts payable after the billing date is a common practice and may not be a sign of financial distress. Restructuring debt, while it may involve some changes to the repayment terms, does not necessarily indicate financial distress.

Question 7

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions:
   Refer to the information for Mobile Company.Mobile's days accounts payable outstanding at the end of 2010 is
A) 7.53 days
B) 48.09 days
C) 45.51 days
D) 50 days

Accepted Answer

The answer of Mobile Company Mobile Company manufactures computer technology...

Question 8

Which of the following is not one of the three explanatory variables that determines a firm's market beta?
A) Degree of investing leverage.
B) Degree of operating leverage.
C) Degree of financial leverage.
D) Variability of sales.

Accepted Answer

The three explanatory variables that determine a firm's market beta are degree of operating leverage, degree of financial leverage, and variability of sales. Degree of investing leverage is not one of those factors.

Question 9

Economic theory teaches that differences in market returns must relate to differences in
A) book value
B) perceived risk
C) price-earnings ratio
D) bankruptcy risk

Accepted Answer

Economic theory teaches that differences in market returns must relate to differences in perceived risk. This is because investors require a higher return for investing in a high-risk asset compared to a low-risk one. Therefore, market returns are higher for riskier assets to compensate for the additional risk. Differences in book value, price-earnings ratio, or bankruptcy risk do not necessarily lead to differences in market returns.

Question 10

Bankruptcy prediction research has identified three broad factors influencing long-term solvency risk,which of the following is not one of the factors?
A) Investment factors
B) Financing factors
C) Operating factors
D) Credit factors

Accepted Answer

Investment factors, financing factors, and operating factors have all been identified as important factors influencing long-term solvency risk. Credit factors are not typically considered as a separate category in bankruptcy prediction research; rather, they are often included within the broader factors of investment and financing.

Question 11

Morrow Company currently has a current ratio of 1.1.The company decides to borrow $1,000,000 from First National Bank for a period of six months.After the borrowing Morrow's current ratio will be
A) greater than 1.1
B) 1.1
C) less than 1.1
D) unable to determine with out more information

Accepted Answer

The answer of Morrow Company currently has a current ratio...

Question 12

Univariate bankruptcy prediction models help identify factors related to bankruptcy,but they do not provide information about
A) specific ratios that are important.
B) the amount of Type I and Type II errors.
C) which specific company will go bankrupt.
D) the relative importance of individual financial statement ratios.

Accepted Answer

The answer of Univariate bankruptcy prediction models help identify factors...

Question 13

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions:
   Refer to the information for Mobile Company.Mobile's Operating Cash Flow to Current Liabilities ratio in 2010 was
A) .70
B) 1.39
C) 1.00
D) .72

Accepted Answer

The answer of Mobile Company Mobile Company manufactures computer technology...

Question 14

Which of the following is a measure of market equity risk?
A) Bankruptcy
B) Beta
C) Overdue amounts
D) Defaults

Accepted Answer

Beta is a measure of market equity risk because it measures the volatility of a stock or portfolio in relation to the overall market. Bankruptcy, overdue amounts, and defaults are more indicative of credit risk or financial distress, rather than market equity risk.

Question 15

Doran Corp.has a current ratio of 6.Under which of the following scenarios might this indicate a problem?
A) inventories are increasing due to the introduction of a new product
B) the company is holding cash in expectation of making a large investment in equipment
C) receivables are increasing due to increasing sales
D) inventories are increasing and the industry in which Doran Corp. operates is experiencing a recession

Accepted Answer

A current ratio of 6 indicates that Doran Corp. has a significant amount of current assets relative to its current liabilities. However, if inventories are increasing and the industry is experiencing a recession, it may indicate that Doran Corp. is having trouble selling its products and is therefore building up inventory. This could lead to cash flow problems and ultimately impact the company's ability to meet its short-term obligations, despite having a high current ratio.

Question 16

The best indicator for assessing a firm's long-term solvency risk is its ability to generate what over a period of years?
A) Sales
B) Earnings
C) Positive cash flows
D) Income from continuing operations

Accepted Answer

The answer of The best indicator for assessing a firm's...

Question 17

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions:
   Refer to the information for Mobile Company.Mobile's quick ratio changed by what percentage from 2009 to 2010?
A) 30%
B) 107%
C) 25%
D) 82%

Accepted Answer

The answer of Mobile Company Mobile Company manufactures computer technology...

Question 18

Here are several ratios calculated from Midas Company's financial statements: Days in Receivables = 43
Days in Payables = 38
Days in Inventory = 31
How many days of working capital financing does Midas need to obtain from other sources?
A) 112 days
B) 36 days
C) 56 days
D) 26 days

Accepted Answer

The answer of Here are several ratios calculated from Midas...

Question 19

Which of the following ratios is not a measure of long-term solvency risk?
A) Debt /Equity Ratio
B) Interest Coverage Ratio
C) Operating Cash Flows to Current Liabilities Ratio
D) Liabilities to Assets Ratio

Accepted Answer

Operating Cash Flows to Current Liabilities Ratio is a measure of short-term liquidity, not long-term solvency risk. The other ratios listed all measure aspects of a company's ability to meet its long-term financial obligations.

Question 20

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions:
   Refer to the information for Mobile Company.Mobile's current ratio in 2010 was
A) 1.07
B) 1.45
C) 1
D) .69

Accepted Answer

Current ratio = Current assets / Current liabilities 
For Mobile Company in 2010: 
Current assets = 8,585 + 5,035 = 13,620 
Current liabilities = 6,315 + 1,459 + 2,734 = 10,508 
Current ratio = 13,620 / 10,508 = 1.30 
Therefore, the closest answer is B) 1.45.

Quiz 5: Risk Analysis

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions: Refer to the information for Mobile Company.Mobile's days receivables outstanding at the end of 2010 was

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions: Refer to the information for Mobile Company.Days of other financing required by Mobile at the end of 2010 would be

Market equity beta measures the covariability of a firm's returns with the return's of

One common problem with the current ratio is that it is susceptible to "window dressing." If prior to the end of the accounting period Saxon Company has a current ratio of 1.5 and management wishes to boost its current ratio it may decide to

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions: Refer to the information for Mobile Company.Mobile's 2010 Inventory Turnover ratio is

Which of the following states of financial distress would be considered the most troubling for an investor or creditor?

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions: Refer to the information for Mobile Company.Mobile's days accounts payable outstanding at the end of 2010 is

Which of the following is not one of the three explanatory variables that determines a firm's market beta?

Economic theory teaches that differences in market returns must relate to differences in

Bankruptcy prediction research has identified three broad factors influencing long-term solvency risk,which of the following is not one of the factors?

Morrow Company currently has a current ratio of 1.1.The company decides to borrow $1,000,000 from First National Bank for a period of six months.After the borrowing Morrow's current ratio will be

Univariate bankruptcy prediction models help identify factors related to bankruptcy,but they do not provide information about

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions: Refer to the information for Mobile Company.Mobile's Operating Cash Flow to Current Liabilities ratio in 2010 was

Which of the following is a measure of market equity risk?

Doran Corp.has a current ratio of 6.Under which of the following scenarios might this indicate a problem?

The best indicator for assessing a firm's long-term solvency risk is its ability to generate what over a period of years?

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions: Refer to the information for Mobile Company.Mobile's quick ratio changed by what percentage from 2009 to 2010?

Here are several ratios calculated from Midas Company's financial statements: Days in Receivables = 43 Days in Payables = 38 Days in Inventory = 31 How many days of working capital financing does Midas need to obtain from other sources?

Which of the following ratios is not a measure of long-term solvency risk?

Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below,use the information to answer the following questions: Refer to the information for Mobile Company.Mobile's current ratio in 2010 was