Question 1

Use the table for the question(s)below. 
-If the above balance sheet is for a retail company,what indications about this company would best be drawn from the changes in stockholders' equity between 2007 and 2008?
A)The company is very profitable because it is obviously collecting receivables faster.
B)The company is selling its property,plant and equipment,which may result in a long-term deficiency in production capacity.
C)The company's net income in 2008 was negative.
D)No conclusions can be drawn regarding stockholders' equity without additional information.

Accepted Answer

The changes in stockholders' equity show a decrease from $22,000 in 2007 to $16,000 in 2008. This suggests that the company had a net loss in 2008, which is further supported by the decrease in retained earnings from $10,000 to $4,000. Option A is incorrect because the collection of receivables would not directly affect the stockholders' equity. Option B is not supported by the information provided in the balance sheet. Option D is not the best choice because some conclusions can be drawn based on the changes in stockholders' equity.

Question 2

The income statement reports the firm's revenues and expenses,and it computes the firm's bottom line of net income,or earnings.

Accepted Answer

The income statement does indeed report the firm's revenues and expenses, and calculates the final result of net income or earnings.

Question 3

Convex Industries has inventories of $200 million,current assets of $1.4 billion,and current liabilities of $530 million.What is its quick ratio?
A)0.38
B)0.44
C)2.12
D)2.26

Accepted Answer

The answer of Convex Industries has inventories of $200 million,current...

Question 4

Use the table for the question(s)below.
  
-Refer to the balance sheet above.If on December 31,2005 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

Accepted Answer

The answer of Use the table for the question(s)below.
 ...

Question 5

A public company has a book value of $128 million.They have 20 million shares outstanding,with a market price of $4 per share.Which of the following statements is true regarding this company?
A)Investors may consider this firm to be a growth company.
B)Investors believe the company's assets are not likely to be profitable its market value is worth less than its book value.
C)The firm's market value is more than its book value.
D)The value of the firm's assets are greater than their liquidation value.

Accepted Answer

The market value ($80 million) is less than the book value ($128 million), suggesting investors may believe the company's assets are not likely to be profitable.

Question 6

Which of the following is NOT considered to be an operating expense on the income statement?
A)administrative expenses and overhead
B)corporate taxes
C)salaries
D)depreciation and amortization

Accepted Answer

Administrative expenses and overhead, salaries, and depreciation and amortization are all considered operating expenses on the income statement. Corporate taxes, however, are generally listed separately from operating expenses and are considered a non-operating expense or income.

Question 7

What will be the effect on the balance sheet if a firm buys a new processing plant through a new loan?

Accepted Answer

The answer of What will be the effect on the...

Question 8

Use the table for the question(s)below.
Income Statement for CharmCorp: 
-Consider the above Income Statement for CharmCorp.All values are in millions of dollars.If CharmCorp has 6 million shares outstanding,and its managers and employees have stock options for 1 million shares,what is its diluted EPS in 2009?
A)$1.42
B)$1.67
C)$2.00
D)$2.33

Accepted Answer

The answer of Use the table for the question(s)below.
Income Statement...

Question 9

Use the table for the question(s)below. 
-If the above balance sheet is for a retail company,how has the company's leverage changed between 2007 and 2008?
A)The company has experienced a very significant decrease in its leverage.
B)The company has experienced a significant decrease in its leverage.
C)The company has experienced no significant change in its leverage.
D)The company has experienced a significant increase in its leverage.

Accepted Answer

The only information given in the balance sheet is the net property, plant, and equipment. Since there are no other liabilities or financial information given, we cannot determine the company's leverage in either year. Therefore, the answer is (D) None of the above.

Question 10

Company A has current assets of $42 billion and current liabilities of $31 billion.Company B has current assets of $2.7 billion and current liabilities of $1.8 billion.Which of the following statements is correct,based on this information?
A)Company A is less likely than Company B to have sufficient working capital to meet its short-term needs.
B)Company A has greater leverage than Company B.
C)Company A has less leverage than Company B.
D)Company A and Company B have roughly equivalent enterprise values.

Accepted Answer

The answer of Company A has current assets of $42...

Question 11

Use the table for the question(s)below.
Income Statement for Xenon Manufacturing: 
-Consider the above Income Statement for Xenon Manufacturing.All values are in millions of dollars.If Xenon Manufacturing has 25 million shares outstanding,what is its EPS in 2009?
A)$0.36
B)$0.40
C)$0.63
D)$0.84

Accepted Answer

EPS = Net Income / Number of Shares OutstandingEPS = $10 million / 25 million sharesEPS = $0.40

Question 12

Use the table for the question(s)below.
  
-Refer to the balance sheet above.If on December 31,2005 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's enterprise value?

Accepted Answer

The answer of Use the table for the question(s)below.
 ...

Question 13

Which ratio would you use to measure the financial health of a firm by assessing that firm's leverage?
A)debt-equity or equity multiplier ratio
B)market-to-book ratio
C)market debt-equity ratio
D)current or quick ratio

Accepted Answer

The debt-equity ratio and equity multiplier ratio both measure the amount of debt a firm has in relation to its equity, which gives an indication of the firm's leverage. A high debt-equity ratio or equity multiplier ratio may suggest that the firm is relying heavily on debt financing, which could make it vulnerable to financial distress. The market-to-book ratio compares the firm's market value to its book value, which may not necessarily provide insight into the firm's leverage. The market debt-equity ratio is not a commonly used ratio and may not provide an accurate measure of the firm's leverage. The current and quick ratios measure the firm's liquidity, which is not directly related to its leverage.

Question 14

Use the table for the question(s)below. 
-If the above balance sheet is for a retail company,what indications about this company would best be drawn from the changes in the balance sheet between 2007 and 2008?
A)The company is having difficulties selling its product.
B)The company has reduced its debt.
C)The company has added a major new asset in terms of plant and equipment.
D)The company has experienced a significant rise in its market value.

Accepted Answer

The answer of Use the table for the question(s)below. 
-If...

Question 15

GenCorp has a total debt of $140 million and stockholders' equity of $50 million.It also has 25 million shares outstanding,with a market price of $3.50 per share.What is GenCorp's market debt-equity ratio?
A)0.36
B)0.63
C)1.02
D)1.60

Accepted Answer

The market value of equity is 25 million shares * $3.50 = $87.5 million. The market debt-equity ratio is total debt ($140 million) divided by market value of equity ($87.5 million), which equals 1.60.

Question 16

Use the table for the question(s)below. 
-If the above balance sheet is for a retail company,what indications about this company would best be drawn from the changes in quick ratio between 2007 and 2008?
A)The company has eliminated the risk that it will experience a cash shortfall in the near future.
B)The company has reduced the risk that it will experience a cash shortfall in the near future.
C)The risk that the company will experience a cash shortfall in the near future is unchanged.
D)The company has increased the risk that it will experience a cash shortfall in the near future.

Accepted Answer

The answer of Use the table for the question(s)below. 
-If...

Question 17

What is a firm's net income?
A)the difference between the sales and other income generated by the firm,and all costs,taxes,and expenses incurred by the firm in a given period
B)the last or "bottom" line of the income statement
C)a measure of the firm's profitability over a given period
D)all of the above

Accepted Answer

Net income is the difference between the sales and other income generated by the firm,and all costs, taxes, and expenses incurred by the firm in a given period. It is the last or "bottom" line of the Income statement and a measure of the firm's profitability over a given period. Therefore, all the options (A), (B), and (C) are correct, making (D) the best choice.

Question 18

How does a firm select the date for preparation of its balance sheet?

Accepted Answer

The answer of How does a firm select the date...

Question 19

What is a firm's gross profit?
A)the difference between the sales and other income generated by the firm,and all costs,taxes,and expenses incurred by the firm in a given period
B)the difference between sales revenues and the costs associated with those sales.
C)the difference between sales revenues and cash expenditures associated with those sales.
D)all of the above

Accepted Answer

Gross profit is the difference between sales revenues and the costs associated with those sales. It does not include all costs, taxes, and expenses incurred by the firm, nor does it consider cash expenditures.

Question 20

A company has a share price of $24.50 and $118 million shares outstanding.Its market-to-book ratio is 4.2,its book debt-equity ratio is 3.2,and it has cash of $800 million.How much would it cost to take over this business assuming you pay its enterprise value?
A)$1.5
B)$2.8 billion
C)$3.6 billion
D)$4.2 billion

Accepted Answer

The answer of A company has a share price of...

Quiz 2: Introduction to Financial Statement Analysis

Use the table for the question(s) below. -If the above balance sheet is for a retail company,what indications about this company would best be drawn from the changes in stockholders' equity between 2007 and 2008?

The income statement reports the firm's revenues and expenses,and it computes the firm's bottom line of net income,or earnings.

Convex Industries has inventories of $200 million,current assets of $1.4 billion,and current liabilities of $530 million.What is its quick ratio?

Use the table for the question(s)below. -Refer to the balance sheet above.If on December 31,2005 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

A public company has a book value of $128 million.They have 20 million shares outstanding,with a market price of $4 per share.Which of the following statements is true regarding this company?

Which of the following is NOT considered to be an operating expense on the income statement?

What will be the effect on the balance sheet if a firm buys a new processing plant through a new loan?

Use the table for the question(s) below. -If the above balance sheet is for a retail company,how has the company's leverage changed between 2007 and 2008?

Company A has current assets of $42 billion and current liabilities of $31 billion.Company B has current assets of $2.7 billion and current liabilities of $1.8 billion.Which of the following statements is correct,based on this information?

Use the table for the question(s) below. Income Statement for Xenon Manufacturing: -Consider the above Income Statement for Xenon Manufacturing.All values are in millions of dollars.If Xenon Manufacturing has 25 million shares outstanding,what is its EPS in 2009?

Use the table for the question(s)below. -Refer to the balance sheet above.If on December 31,2005 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's enterprise value?

Which ratio would you use to measure the financial health of a firm by assessing that firm's leverage?

Use the table for the question(s) below. -If the above balance sheet is for a retail company,what indications about this company would best be drawn from the changes in the balance sheet between 2007 and 2008?

GenCorp has a total debt of $140 million and stockholders' equity of $50 million.It also has 25 million shares outstanding,with a market price of $3.50 per share.What is GenCorp's market debt-equity ratio?

Use the table for the question(s) below. -If the above balance sheet is for a retail company,what indications about this company would best be drawn from the changes in quick ratio between 2007 and 2008?

What is a firm's net income?

How does a firm select the date for preparation of its balance sheet?

What is a firm's gross profit?

A company has a share price of $24.50 and $118 million shares outstanding.Its market-to-book ratio is 4.2,its book debt-equity ratio is 3.2,and it has cash of $800 million.How much would it cost to take over this business assuming you pay its enterprise value?