兹维博迪金融学第二版试题库3TB（1）

Chapter Three

Managing Financial Health and Performance

This chapter contains 62multiple choice questions, 19 short problems and 9 longer problems.Multiple Choice

1.For a corporation, net worth is called ________.(a) net income(b) assets

(c) stockholder’s equity(d) retained earningsAnswer: (c)

2.On a company’s published balance sheet, the value of assets, liabilities and net worth, are measuredat ________.

(a)expected market value(b)current book value(c)current market value(d)historical acquisition costsAnswer: (d)

3.Any U.S. or non-U.S. company that wishes to list its shares on a U.S. exchange must regularly reportits activities by filing financial statements with the ________.(a)SEC(b)NYSE(c)GAAP(d)AMEXAnswer: (a)

4.Noncurrent assets typically consist of ________.(a)accounts payable

(b)receivables and inventories(c)cash and marketable securities(d)property, plant, and equipmentAnswer: (d)

5.The difference between a firm’s current assets and its current liabilities is called ________.(a)net worth

(b)net working capital(c)net income

(d)stockholder’s equityAnswer: (b)

6.________ is the difference between revenues and cost of goods sold.(a)Operating income(b)Gross margin(c)Taxable income

(d)Change in retained earningsAnswer: (b)

7.________ is the difference between gross margin and GS&A expenses.(a)Operating income(b)Gross margin(c)Taxable income(d)Net incomeAnswer: (a)

8.Although it differs from the income statement, the statement of cash flows is a useful supplement tothe income statement because:

(a)it focuses attention on what is happening to the firm’s cash position over time

(b)it avoids the judgments about revenue and expense recognition that go into the incomestatement

(c)it is influenced by accrual accounting decisions(d)(a) and (b)Answer: (d)

9.On the statement of cash flows, the purchase of new plant and equipment represents a ________.(a)cash flow from operating activity(b)cash flow from investing activity(c)cash flow from financing activity(d)total cash flow from (a) + (b) +(c )Answer: (b)

10.On the balance sheet, the value of assets, liabilities, and net worth are measured in accordance with________.

(a)generally accepted economic principles(b)generally accepted accounting principles(c)market value accreditation

(d)generally adopted and accredited principlesAnswer: (b)

11.________ is the official accounting value of assets and shareholder’s equity.(a)Market value

(b)Historical market value(c)Book value

(d)Economic value addedAnswer: (c)

12.Building up a good reputation for quality and reliability, and building up a knowledge base as theresult of past research and development, are both examples of ________ that add to the firm’s________.

(a)intangible assets, book value(b)tangible assets, market value(c)tangible assets, book value(d)intangible assets, market valueAnswer: (d)

13.The value of goodwill is the difference between the ________ of the acquisition and its ________.(a)market price, book value(b)amortized value, market price(c)historical acquisition cost, book value(d)market price, after tax valueAnswer: (a)

14.At the beginning of 19X7 Success Galore has a market price of $250 per share and at the end of theyear $225.50. Cash dividends for the year are $7.50 per share. Compute the total shareholder returns.(a)6.8%(b)–6.8%(c)12.8%(d)–12.8%Answer: (b)

15.Success Galore had a market price of $178 per share at the beginning of 19X7 and at the end of the

year the price per share was $205.50. Cash dividends for the year were $7 per share. Calculate the total shareholder returns.(a)19.38%(b)–19.38%(c)16.79%(d)–16.79%Answer: (a)

16.In 19X7, Kanga Inc. had a net income of $40.2 million, assets of $600 million, and shareholders’

equity of $405 million. Calculate the return on equity.(a)4%(b)6.7%(c)9.93%(d)20.62%Answer: (c)

17.Asset turnover ratios ________.(a)assess the firm’s profitability

(b)assess the firm’s ability to use its assets productively in generating revenue(c)highlight the capital structure of the firm

(d)measure the ability of the firm to meet its short-term obligationsAnswer: (b)

Use the information below for BGB Manufacturing to answer Questions 18-22.

18.Calculate the current ratio for BGB Manufacturing for 1998.(a)1.5 times(b)2.43 times(c)3.19 times(d)4.25 timesAnswer: (b)

19.Calculate the quick ratio for BGB Manufacturing for 1997.(a)0.25 times(b)0.5 times(c)0.75 times(d)1.5 timesAnswer: (c)

20.From the perspective of a bank loan officer from 1997 to the present, which of the following

statements best summarizes the information revealed by the current ratio and quick ratio for BGB Manufacturing?(a)The ability of the firm to meet its long-term obligations has deteriorated.(b)The ability of the firm to meet its short-term obligations has improved.(c)The ability of the firm to meet its short-term obligations has deteriorated.(d)The ability of the firm to meet its long-term obligations has improved.Answer: (b)

21.Calculate the debt ratio for BGB Manufacturing for 1999.(a)0.14%

(b)0.24%(c)0.48%(d)0.82%Answer: (c)

22.Calculate the times interest earned (TIE) ratio for BGB Manufacturing for 1998.(a)2.25 times(b)2.7 times(c)3.25 times(d)5.2 timesAnswer: (c)

23. If a firm’s total asset turnover ratio is 3.0:

(a)its average total assets are one-sixth of its annual sales(b)its average total assets are three times its annual sales(c)its annual sales are three times its average total assets(d)its annual sales are one-third of its total assetsAnswer: (c)

24. A firm has a P/E of 9 and a market to book ratio of 2.5. If EPS are $3.50, what is the book value pershare?(a) $8.75(b) $12.60(c) $31.50(d) $78.75Answer: (b)

25. A firm has EBIT of $3 million, sales of $15 million, and average total assets of $30 million. Calculateits ROA.(a)6.67%(b)10%(c) 20%(d) 50%Answer: (b)

26. If the average inventory for a firm is $17 million and inventory turnover is 0.9 times, what is its costof goods sold?(a)$15.3 million(b)$18. million(c)$153 million

(d)$188.9 millionAnswer: (a)

27. If the average total assets for the Heartland Corporation are $660 million and EAT are $100 million,calculate its ROA. Assume a tax rate of 40% and interest of $3 million.(a) 15.15%(b) 15.6%(c) 25.15%(d) 25.71%Answer: (d)

28. The beginning of year receivables for a firm are $40 million. If the receivables turnover for the firm is4.2 times and its sales are $220 million, calculate the firm’s end of year receivables.(a) $24.76 million(b) $52.38 million(c) $.76 million(d) $168 millionAnswer: (c)

29. In developing a financial plan, the first step is to:(a) distribute rewards and punishments to relevant parties(b) develop the firm’s strategic plan

(c) establish specific performance targets for the firm and its suppliers(d) adjust targets based on the previous year’s dataAnswer: (b)

30. The planning horizon is an important component of the financial planning process. Generally, thelonger the horizon:

(a) the less detailed the financial plan(b) the more detailed the financial plan

(c) the more performance targets the financial plan will include(d) the less a financial plan is neededAnswer: (a)

31. The “blueprints,” or the tangible outcomes of the financial planning process, are in the form of:(a) executive stock options(b) auditor’s recommendations

(c) projected financial statements and budgets(d) tactical plans and budgetsAnswer: (c)

32. Based on a consideration of the planning horizon, which of the following projects is most likely toconsist of the most detailed financial plans?(a) a five-year financial plan(b) a one-year financial plan(c) a six-month financial plan(d) a one-month financial planAnswer: (d)

33. Forecasting sales for the next year and assuming that most of the items on the income statement andbalance sheet will maintain the same ratio to sales as in the previous year is called the_______________ method.(a) forecast ratio(b) percent-of-sales(c) planning horizon(d) financial predictorAnswer: (b)

34. Using the percent-of-sales method, which of the following variables are typically assumed to increaseproportionately with sales?(a) costs(b) EBIT(c) assets(d) all of the aboveAnswer: (d)

35. Rupert’s Glassworks Ltd. has an inventory period of 50 days, a receivables period of 55 days, and apayables period of 40 days. Compute its cash cycle time.(a) 35 days(b) 45 days(c) 65 days(d) 105 daysAnswer: (c)

Questions 36 through 45 refer to the following information:

Income Statement data and Balance Sheet data is provided for the firm Neural Way Inc. for 19x7 and 19x8.Financial Statementsfor Neural Way Inc.19x719x8Income Statement

Sales$1,500,000$1,980,000

Cost of Goods Sold$967,500$1,277,100Gross Margin$532,500$702,900Operating Expenses

Advertising Expense$50,400$66,528Rent Expense$72,000$95,040

Salesperson Commission Expense$48,000$63,360Utilities Expense$15,000$19,800EBIT$347,100$458,172

Interest Expense$102,000$107,000Taxable Income$245,100$351,172Taxes (@35%)$85,785$122,910Net Income$159,315$228,262

Dividends (40% payout)$63,726$91,305Change in Shareholders Equity$95,5$136,957Balance SheetAssets

Cash and Equivalents$310,000$409,266Receivables$205,000$270,666Inventories$720,000$950,400

Property, Plant and Equipment$1,956,000$2,571,306Total Assets$3,191,000$4,201,638Liabilities

Payables$310,000$409,266

Short Term Debt (10% interest)$510,000$1,088,535Long Term Debt (7% interest)$800,000$995,880Shareholders equity

Common Stock$1,150,000$1,150,000Retained earnings$421,000$557,957

Total Liabilities and Equity$3,191,000$4,201,638

36. From the financial data provided, which of the following items has maintained a fixed ratio to sales?(a) interest expense(b) net income(c) rent expense(d) taxes

Answer: (c)

37.What is the ratio between sales and dividend payments in 19x8?(a) 3.22%(b) 4.25%(c) 4.61%(d) 6.09%Answer: (c)

38.Calculate the rate of sales growth from 19x7 to 19x8.(a) 48%(b) 32%(c) 24.24%(d) 31.25%Answer: (b)

39.What is the firm’s return on equity for 19x8?(a) 10.14%(b) 13.36%(c) 19.85%(d) 40.91%Answer: (b)

40.What is the firm’s external financing funding requirement determined to be for 19x8?(a) $774,415(b) $873,681(c) $911,372(d) $972,947Answer: (a)

41.If it is assumed that sales will grow by 17% for 19x9, then sales for 19x9 are forecast to be ________.(a) $1,755,000(b) $2,316,600(c) $2,613,600(d) $11,7,059Answer: (b)

42.If sales growth is forecast to be 17% for 19x9, what is the forecast gross margin for 19x9?(a) $393, 822(b) $822,393(c) $873,300

(d) $927,828Answer: (b)

43.How much additional funding will the firm need for 19x9?(a) $709,4(b) $639,979(c) $618,863(d) $9,288Answer: (d)

44.In 19x7, taxable income is what proportion of sales?(a) 5.72%(b) 6.11%(c) 16.34%(d) 17.74%Answer: (c)

45.In 19x8, common stock is what proportion of sales?(a) 28.18%(b) 58.08%(c) 76.67%(d) 86.26%Answer: (b)

46.Which is the correct formula for calculating a firm’s sustainable growth rate?(a) sustainable growth rate = earnings retention rate x ROE(b) s ustainable growth rate = earnings retention rate x ROI(c) sustainable growth rate = (1 – dividend payout) x ROE x ROI(d) s ustainable growth rate = share repurchase rate x ROIAnswer: (a)

47.Lucinda Inc. has the following fixed ratios:Asset Turnover = 0.6 Times per YearDebt/Equity Ratio = 1.5Dividend Payout Ratio = 0.53ROE = 25% per Year

What is the sustainable growth rate for this firm?(a) 10%(b) 11.75%(c) 15%

(d) 39.75%Answer: (b)

48.Onegin Corporation has the following fixed ratios:Asset Turnover = 0.4 Times per YearDebt/Equity Ratio = 1.4Dividend Payout Ratio = 0.49ROE = 27% per Year

What is the sustainable growth rate for this firm?(a) 13.77%(b) 14%(c) 16.2%(d) 18.25%Answer: (a)

49. If a firm’s working capital need is permanent rather than seasonal, the firm ________.(a) will usually seek short-term financing for it(b) will not seek financing at all

(c) will revise its strategic plan immediately(d) will usually seek long-term financing for itAnswer: (d)

50. Which of the following is not part of a firm’s working capital?(a) inventories(b) accounts payable(c) plant and equipment(d) cashAnswer: (c)

51. Working capital is defined to be ________.

(a) the difference between current assets and current liabilities(b) the difference between accounts receivable and accounts payable(c) the difference between current assets and shareholders’ equity(d) the difference between total assets and total liabilitiesAnswer: (a)

52. The cash cycle time begins with ________and ends with ________.(a) payment of cash to suppliers, liquidation of inventory(b) receipt of cash from customers, payment of cash to suppliers(c) payment of cash to suppliers, receipt of cash from customers

(d) selling of purchase on credit, receipt of cash from customersAnswer: (c)

53. Which of the following is the correct representation of the cash cycle time?(a) Cash cycle time = inventory period – payables period

(b) Cash cycle time = inventory period – receivables period – payables period(c) Cash cycle time = receivables period – payables period

(d) Cash cycle time = inventory period + receivables period – payables periodAnswer: (d)

. A firm’s required investment in working capital is ________ to the cash cycle length of time.(a) inversely proportional(b) directly related(c) indirectly related(d) not related at allAnswer: (b)

Use the following data to answer Questions 55 - 59

Prepare a multi-step income statement for Kangarucci Inc. (a retailer) for the year ending December 31, 1997. Use theinformation below:Interest Expense 18,799Beginning Inventory 422,550Depreciation 14,861

General and Administrative Expenses 19,745Advertising 14,090Interest Income 5,087Ending Inventory 456,988Gross Sales 3,777Taxes 10,006

Lease Payments 61,444Purchase of Materials 199,766Returns and Allowances 9,888R&D Expenditures 12,867Repairs and Maintenance 7,255. The cost of goods sold is ________.(a)$34,438(b)$165,328(c)$199,766(d)234,204

Answer: (b)

56. The operating expenses for the period are ________.(a)$95,279(b)$110,140(c)$115,688(d)$130,9Answer: (d)

57. The gross margin for the period is ________.(a)$353,700(b)$368,561(c)$378,449(d)$3,777Answer: (b)

58. The operating income for the period is ________.(a)$238,012(b)$247,900(c)$273,282(d)$283,170Answer: (a)

59. The net income is ________.(a)$214,294(b)$209,207(c)$204,120(d)$1,259Answer: (a)

60. In the construction of a statement of cash flows, which of the following is considered a financingactivity?

(a)increase in accounts payable(b)repayment of long-term debt(c)reduction of accounts receivable(d)purchase of gross fixed assetsAnswer: (b)

61. Assume you are given the following information for Flanders Company:Current Ratio: 2.5xQuick Ratio: 2.0x

Current Liabilities: $200,000

Current assets comprise cash, account receivables and inventory.Compute Inventory.(a)$500,000(b)$400,000(c)$100,000(d)$80,000Answer: (c)

62. Assume you are given the following information for Flanders Company:Return on Assets (ROA): 11%Return on Equity (ROE): 20%Total Asset Turnover: 1.5x

Calculate the ROS for Flanders Company.(a)7.33%(b)13.33%(c)13.%(d)16.5%Answer: (a)Short Problems

1.Explain why the market price of a company’s stock does not necessarily equal its book value.Answer:

The book value does not include all of a firm’s assets and liabilities.

The assets and liabilities included on a firm’s official balance sheet are (for the most part) valued at original acquisition costless depreciation, rather than at current market values.

2.Explain why it may be possible for two firms to have the same ROA.Answer: ROA = ROS x ATO

For example, a supermarket (low profit margin, high asset turnover) and a jewelry store (high profit margin, low assetturnover) – could have the same ROA.

3.As a financial document, what purpose does the statement of cash flows serve? What is a benefit ofthe statement of cash flows?

Answer: The statement of cash flows gives a summary of cash flows from operating, investing, and financing activities for aperiod of time. The statement of cash flows focuses attention on what is happening to the firm’s cash position over time and italso avoids judgements about revenue and expense recognition that go into the income statement. A benefit of the statementof cash flows is that it is not influenced by accrual accounting decisions.4.What are the three types of benchmarks?Answer:

Financial ratios of other companies for the same period of time.

Financial ratios of the company itself in previous time periods.

Information extracted from financial markets such as asset prices or interest rates.

5.You invest in a stock that costs $215.50. It pays a cash dividend during the year of $12.20 and youexpect its price to be $229 at year’s end. What is the total shareholder return?Answer:

Total Shareholder returns = Ending Price of a Share – Beginning Price of Share + Cash DividendBeginning Price of Share= $229 - $215.50 + $12.20$215.50= 11.93%

6.In 19X7, Slater Inc. had a net income of $30.3 million, assets of $560 million, and shareholdersequity of $400 million. Calculate its return on equity.Answer: Return on equity = Net IncomeShareholders’ Equity= $30.3$400= 7.58%

7.Grad Inc. has EBIT of $13 million, sales of $25 million, and average total assets of $50 million.Calculate its ROA.

Answer: Return on assets = EBIT x SalesSales Assets= 13 x 252550= 26%

8.If Profit Inc. has interest expenses of $16,000 per year, sales of $1,000,000, a tax rate of 40%, and anet profit margin of 7%, what is Success Inc.’s times interest earned ratio?Answer: EAT = Sales x Net Profit Margin= $1,000,000 x 0.07= $70,000EBT = EAT/(1-T)= $70,000/0.6= $116,667EBIT = EBT + I= $116,667 + $16,000= $132,667

T.I.E = EBIT/ Interest Expense= $132,667/ $16,000= 8.29 times