Question 1

A firm has fixed operating costs of $25,000, a per unit sales price of $5, and a variable cost per unit of $3.What is its operating breakeven point if it desires net operating income of $10,000, not $0 (zero)?

Accepted Answer

To calculate the operating breakeven point with a desired net operating income, we need to use the following formula:

Operating Breakeven Point (in units) = (Fixed Costs + Desired Net Operating Income) / Contribution Margin per unit

Contribution Margin per unit = Sales price per unit - Variable cost per unit 
Contribution Margin per unit = $5 - $3 = $2

Operating Breakeven Point (in units) = ($25,000 + $10,000) / $2 
Operating Breakeven Point (in units) = $35,000 / $2 
Operating Breakeven Point (in units) = 17,500 units

Therefore, the best choice is C, 17,500 units.

Question 2

An analyst should be careful when conducting ratio analysis to ensure that

Accepted Answer

It is important for an analyst to look at multiple ratios and not judge the overall performance of a firm based on a single ratio. Using only one ratio can give a distorted picture and may not accurately represent the true financial health of the company.

Question 3

A firm with total asset turnover lower than the industry average may have

Accepted Answer

A lower total asset turnover compared to the industry average indicates that the firm is not using its assets as efficiently as its peers to generate sales, but it does not directly imply excessive debt, cost of goods sold, sales, or insufficient fixed assets.

Question 4

The ________ method of developing a pro forma income statement forecasts sales and values for the cost of goods sold, operating expenses, and interest expense that are expressed as a ratio of projected sales. None of the above clone of prior item.

Accepted Answer

The correct method is the "percent of sales" method, which is not listed among the options. This method involves forecasting sales and expressing other financial statement items as a percentage of projected sales.

Question 5

An analyst should be careful when conducting ratio analysis to ensure that

Accepted Answer

All of the given options are important considerations when conducting ratio analysis. A single ratio cannot determine the overall performance of the firm, so multiple ratios should be evaluated. The dates of the financial statements need to be the same for meaningful comparison. Audited statements are more reliable than unaudited statements. And, the use of consistent accounting procedures is necessary for accurate analysis.

Question 6

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be -$230,000.The firm should prepare to

Accepted Answer

A negative external financing requirement indicates that the firm has excess funds, which can be used to repurchase common stock.

Question 7

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information, the breakeven sales level in dollars is

Accepted Answer

The breakeven point in units is calculated as Fixed Costs / (Selling Price per Unit - Variable Cost per Unit) = $75,000 / ($14.99 - $4.99) = 7,500 units. The breakeven sales level in dollars is then 7,500 units * $14.99 = $112,425.

Question 8

A firm has fixed operating costs of $150,000, total sales of $1,500,000, and total variable costs of $1,275,000.With this data, theThe firm's operating breakeven point during the year, in dollars, is

Accepted Answer

The answer of A firm has fixed operating costs of...

Question 9

An analyst should be careful when conducting ratio analysis to ensure that None of the above clone of prior item.

Accepted Answer

The correct answer is E because none of the choices are correct.

Question 10

A firm's sales forecast is usually based on A, B ,and C can be correct; not mentioned in textbook.

Accepted Answer

Sales forecasts are generally based on both internal and external factor estimates, which may include factors such as past sales data, market trends, economic indicators, and input from the sales force. While accounts receivable experience may provide some insight into past sales, it is not typically the primary or sole basis for a sales forecast. The textbook does not mention options A or B as the only methods used for sales forecast.

Question 11

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be $230,000.The firm should prepare to

Accepted Answer

Since the firm has estimated that external financing required is $230,000, the best option would be to arrange for a loan of $230,000 to fulfill the financing needs. The other options like repurchasing common stock or investing in marketable securities do not fulfill the external financing requirements. Additionally, if the balance sheet does not balance, then the firm should review its financial statements to identify any errors or omissions.

Question 12

The ________ method of developing a pro forma income statement forecasts sales and values for the cost of goods sold, operating expenses, and interest expense that are expressed as a ratio of projected sales.

Accepted Answer

The percent of sales method is used to develop a pro forma income statement by expressing the different expenses as a percentage of sales. This helps in forecasting the financial performance of a business by estimating the values of expenses and income in proportion to the projected sales. The other methods like accrual, judgmental, and cash do not involve the use of sales-based percentages to develop a pro forma income statement.

Question 13

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be -$230,000.The firm should prepare to None of the above clone of prior item.

Accepted Answer

A negative external financing requirement indicates that the firm has excess funds. Therefore, it can choose to repurchase stock, pay off debt, accumulate cash, or invest in securities.

Question 14

A firm with total asset turnover lower than the industry average may have

Accepted Answer

Total asset turnover is calculated by dividing net sales by total assets. A lower total asset turnover may indicate that the firm is not generating sufficient sales compared to its total assets. Therefore, it is likely to have insufficient sales.

Question 15

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information, the breakeven sales level in dollars is None of the above clone of prior item.

Accepted Answer

To find the breakeven sales level in dollars, first calculate the breakeven point in units: Fixed Costs / (Selling Price per Unit - Variable Cost per Unit) = $75,000 / ($14.99 - $4.99) = 7,500 units. Then, multiply the breakeven units by the selling price: 7,500 units * $14.99 = $112,425. Since $112,425 is not listed, the answer is "none of the above."

Question 16

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be -$230,000.The firm should prepare to

Accepted Answer

A negative external financing requirement indicates excess funds, allowing the firm to repurchase stock, pay off debt, accumulate cash, or invest in securities.

Question 17

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be $230,000.The firm should prepare to

Accepted Answer

External financing required indicates a need for additional funds, not repurchasing stock, paying off loans, or investing in securities.

Question 18

________ evidence of the existence of a problem or outstanding management performance is provided by ratio analysis.

Accepted Answer

Ratio analysis provides only inconclusive evidence of the existence of a problem or outstanding management performance. It helps to identify certain trends and relationships, but further investigation is needed to confirm any issues or achievements. Conclusive, complete, or definitive evidence cannot be solely determined through ratio analysis.

Question 19

A firm with a total asset turnover lower than the industry standard and a current ratio which meets the industry standard may have

Accepted Answer

A firm with a total asset turnover lower than the industry standard may have excessive fixed assets, as this indicates that the firm is not efficiently using its assets to generate sales. The current ratio meeting the industry standard suggests that current assets and liabilities are in balance, so the issue likely lies with fixed assets.

Question 20

________ evidence of the existence of a problem or outstanding management performance is provided by ratio analysis.

Accepted Answer

Ratio analysis provides general, incomplete, and initial evidence of the existence of a problem or outstanding management performance.

Quiz 14: Financial Analysis and Long-Term Financial Planning

A firm has fixed operating costs of $25,000, a per unit sales price of $5, and a variable cost per unit of $3.What is its operating breakeven point if it desires net operating income of $10,000, not $0 (zero) ?

An analyst should be careful when conducting ratio analysis to ensure that

A firm with total asset turnover lower than the industry average may have

The ________ method of developing a pro forma income statement forecasts sales and values for the cost of goods sold, operating expenses, and interest expense that are expressed as a ratio of projected sales. None of the above clone of prior item.

An analyst should be careful when conducting ratio analysis to ensure that

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be -$230,000.The firm should prepare to

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information, the breakeven sales level in dollars is

A firm has fixed operating costs of $150,000, total sales of $1,500,000, and total variable costs of $1,275,000.With this data, theThe firm's operating breakeven point during the year, in dollars, is

An analyst should be careful when conducting ratio analysis to ensure that None of the above clone of prior item.

A firm's sales forecast is usually based on A, B ,and C can be correct; not mentioned in textbook.

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be $230,000.The firm should prepare to

The ________ method of developing a pro forma income statement forecasts sales and values for the cost of goods sold, operating expenses, and interest expense that are expressed as a ratio of projected sales.

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be -$230,000.The firm should prepare to None of the above clone of prior item.

A firm with total asset turnover lower than the industry average may have

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information, the breakeven sales level in dollars is None of the above clone of prior item.

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be -$230,000.The firm should prepare to

Ningbo Shipping has prepared the coming year's pro forma balance sheet and has estimated that external financing required would be $230,000.The firm should prepare to

________ evidence of the existence of a problem or outstanding management performance is provided by ratio analysis.

A firm with a total asset turnover lower than the industry standard and a current ratio which meets the industry standard may have

________ evidence of the existence of a problem or outstanding management performance is provided by ratio analysis.