Question 1

-Refer to Scenario: Pettijohn Inc. What is the firm's book value per share?

Accepted Answer

A)   $61.73
B)   $64.98
C)   $68.40
D)   $72.00E) A) and C)
F) C) and D)

Question 2

Last year Central Chemicals had sales of $205,000, assets of $127,500, a profit margin of 5.3%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by $21,000 without affecting either sales or costs. Had it reduced its assets in this amount, and had the debt ratio, sales, and costs remained constant, by how much would the ROE have changed?

Accepted Answer

A)   1.81%
B)   2.02%
C)   2.22%
D)   2.44%E) A) and B)
F) None of the above

Question 3

-Refer to Scenario: Pettijohn Inc. What is the firm's days sales outstanding? Assume a 360-day year for this calculation.

Accepted Answer

A)   50.71
B)   53.38
C)   56.19
D)   59.14E) B) and D)
F) All of the above

Question 4

The inventory turnover and current ratio are related. The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

Accepted Answer

A) True 
 B)False

Question 5

-Refer to Scenario: Pettijohn Inc. What is the firm's P/E ratio?

Accepted Answer

A)   12.0
B)   12.6
C)   13.2
D)   13.9E) B) and C)
F) None of the above

Question 6

-Refer to Scenario: Pettijohn Inc. What is the firm's market-to-book ratio?

Accepted Answer

A)   0.66
B)   0.78
C)   0.92
D)   1.08E) A) and C)
F) B) and C)

Question 7

Last year Urbana Corp. had $197,500 of assets, $307,500 of sales, $19,575 of net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to $33,000. Assets, sales, and the debt ratio would not be affected. By how much would the cost reduction improve the ROE?

Accepted Answer

A)   9.32%
B)   9.82%
C)   10.33%
D)   10.88%E) A) and B)
F) None of the above

Question 8

"Mark to Market" is the process of adjusting the valuation of assets from their recorded accounting value to a valuation based on market prices.

Accepted Answer

A) True 
 B)False

Question 9

ABC Inc. has a 59-day average payables period. The account payables are $2,737.50 at the beginning and $3,589.50 at the end of the covering year. What is the annual cost of goods sold? Use a 365-day year when calculating the APP.

Accepted Answer

A)   $17,265
B)   $18,992
C)   $19,571
D)   $20,123E) A) and D)
F) None of the above

Question 10

Walter Industries' current ratio is 0.5. Considered alone, which of the following actions would increase the company's current ratio?

Accepted Answer

A)   Borrow using short-term notes payable and use the cash to increase inventories.
B)   Use cash to reduce accruals.
C)   Use cash to reduce accounts payable.
D)   Use cash to reduce short-term notes payable.E) None of the above
F) B) and D)

Exam 3: Analysis of Financial Statements

"Mark to Market" is the process of adjusting the valuation of assets from their recorded accounting value to a valuation based on market prices.

Correct Answer
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Correct Answer
verified

ABC Inc. has a 59-day average payables period. The account payables are $2,737.50 at the beginning and $3,589.50 at the end of the covering year. What is the annual cost of goods sold? Use a 365-day year when calculating the APP.

Correct Answer
verified

-Refer to Scenario: Pettijohn Inc. What is the firm's P/E ratio?

Correct Answer
verified

The inventory turnover and current ratio are related. The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

Correct Answer
verified

-Refer to Scenario: Pettijohn Inc. What is the firm's market-to-book ratio?

Correct Answer
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Walter Industries' current ratio is 0.5. Considered alone, which of the following actions would increase the company's current ratio?

Correct Answer
verified

-Refer to Scenario: Pettijohn Inc. What is the firm's book value per share?

Correct Answer
verified

-Refer to Scenario: Pettijohn Inc. What is the firm's days sales outstanding? Assume a 360-day year for this calculation.

Correct Answer
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Correct Answer
verified

Exam 3: Analysis of Financial Statements

"Mark to Market" is the process of adjusting the valuation of assets from their recorded accounting value to a valuation based on market prices.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

ABC Inc. has a 59-day average payables period. The account payables are $2,737.50 at the beginning and $3,589.50 at the end of the covering year. What is the annual cost of goods sold? Use a 365-day year when calculating the APP.

Correct AnswerverifiedShow Answer

-Refer to Scenario: Pettijohn Inc. What is the firm's P/E ratio?

Correct AnswerverifiedShow Answer

The inventory turnover and current ratio are related. The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

Correct AnswerverifiedShow Answer

-Refer to Scenario: Pettijohn Inc. What is the firm's market-to-book ratio?

Correct AnswerverifiedShow Answer

Walter Industries' current ratio is 0.5. Considered alone, which of the following actions would increase the company's current ratio?

Correct AnswerverifiedShow Answer

-Refer to Scenario: Pettijohn Inc. What is the firm's book value per share?

Correct AnswerverifiedShow Answer

-Refer to Scenario: Pettijohn Inc. What is the firm's days sales outstanding? Assume a 360-day year for this calculation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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