1、CHAPTER3Financial Statement Analysis, Planning, and GrowthMultiple Choice Questions:DEFINITIONSLONG-TERMPLANNING1. One key reasona long-term financial plan is developed is because:the plan determines your financial policy.the plan determines your investment policy.there are direct connections betwee

2、n achievable corporate growth and the financial policy.there is unlimited growth possible in a well-developed financial plan.None of the above.PRO FORMASTATEMENTS2. Projected future financial statementsare called:plug forma statements.reconciled statements.aggregatedstatements.none of the above.PERC

3、ENTAGEOF SALES3. The percentageof salesmethod:requires that all accounts grow at the samerate.separatesaccountsthat vary with salesand those that do not vary with sales.allows the analyst to calculate how much financing the firm will need to support the predicted saleslevel.Both A and B.Both B and C

4、.COMMON-SIZESTATEMENTS4. A _ standardizesitems on the income statementand balancesheetas a percentage of total salesand total assets,respectively.tax reconciliation statementstatementof standardizationstatementof cash flowscommon-base year statementcommon-size statementFINANCIALRATIOSa5. Relationshi

5、ps determined from a firm sfinancial information and used for comparison purposes are known as:financial parison statements.dimensional analysis.scenario analysis.solvency analysis.SHORT-TERMSOLVENCYRATIOS6. Financial ratios that measurea firm sability to pay its bills over the short run without und

6、ue stressare known as _ ratios.assetmanagementlong-term solvencyshort-term solvencyprofitabilitymarket valueCURRENTRATIO7. The current ratio is measuredas:current assetsminus current liabilities.current assetsdivided by current liabilities.current liabilities minus inventory, divided by current asse

7、ts.cash on hand divided by current liabilities.current liabilities divided by current assets.QUICKRATIO8. The quick ratio is measuredas:current assetsdivided by current liabilities.cash on hand plus current liabilities, divided by current assets.current liabilities divided by current assets,plus inv

8、entory.current assetsminus inventory, divided by current liabilities.current assetsminus inventory minus current liabilities.CASH RATIO9. The cash ratio is measuredas:current assetsdivided by current liabilities.current assetsminus cash on hand, divided by current liabilities.current liabilities plu

9、s current assets,divided by cashon hand.cash on hand plus inventory, divided by current liabilities.cash on hand divided by current liabilities.LONG-TERMSOLVENCYRATIOS10. Ratios that measurea firm sfinancial leverage are known as _ ratios.assetmanagementlong-term solvencyshort-term solvencyprofitabi

10、litymarket valueTOTALDEBT RATIO11. The financial ratio measuredas total assetsminus total equity, divided by total assets,is the:total debt ratio.equity multiplier.debt-equity ratio.current ratio.times interest earnedratio.DEBT-EQUITYRATIO12. The debt-equity ratio is measuredas total:equity minus to

11、tal debt.equity divided by total debt.debt divided by total equity.debt plus total equity.debt minus total assets,divided by total equity.EQUITYMULTIPLIER13. The equity multiplier ratio is measuredas total:equity divided by total assets.equity plus total debt.assetsminus total equity, divided by tot

12、al assets.assetsplus total equity, divided by total debt.assetsdivided by total equity.TIMES INTERESTEARNEDRATIO14. The financial ratio measuredas earnings before interest and taxes, divided by interest expenseis the:cash coverage ratio.debt-equity ratio.times interest earnedratio.gross margin.total

13、 debt ratio.CASH COVERAGERATIO15. The financial ratio measuredas earnings before interest and taxes, plus depreciation, divided by interest expense,is the:cash coverage ratio.debt-equity ratio.times interest earnedratio.gross margin.total debt ratio.ASSET MANAGEMENTRATIOSa16.Ratios that measurehow e

14、fficiently a firm usesits assetsto generatesalesare known as_ ratios.assetmanagementlong-term solvencyshort-term solvencyprofitabilitymarket valueINVENTORYTURNOVER17. The inventory turnover ratio is measuredas:total salesminus inventory.inventory times total sales.cost of goods sold divided by inven

15、tory.inventory times cost of goods sold.inventory plus cost of goods sold.DAYS SALES IN INVENTORY18. The financial ratio days salesin inventory is measuredas:inventory turnover plus 365 days.inventory times 365 days.inventory plus cost of goods sold, divided by 365 days.365 days divided by the inven

16、tory.365 days divided by the inventory turnover.RECEIVABLESTURNOVER19. The receivables turnover ratio is measuredas:salesplus accounts receivable.salesdivided by accounts receivable.salesminus accounts receivable, divided by sales.accounts receivable times sales.accounts receivable divided by sales.

17、DAYS SALES IN RECEIVABLES20. The financial ratio days salesin receivables is measuredas:receivables turnover plus 365 days.accounts receivable times 365 days.accounts receivable plus sales, divided by 365 days.365 days divided by the receivables turnover.365 days divided by the accounts receivable.T

18、OTALASSET TURNOVER21. The total assetturnover ratio is measuredas:salesminus total assets.salesdivided by total assets.salestimes total assets.total assetsdivided by sales.total assetsplus sales.PROFITABILITYRATIOSd22. Ratios that measurehow efficiently a firm smanagementusesits assetsand equity to

19、generatebottom line net income are known as _ ratios.assetmanagementlong-term solvencyshort-term solvencyprofitabilitymarket valuePROFITMARGINa23.The financial ratio measuredas net income divided by salesis known as the firm s:profit margin.return on assets.return on equity.assetturnover.earnings be

20、fore interest and taxes.RETURNON ASSETS24. The financial ratio measuredas net income divided by total assetsis known as the firm s:profit margin.return on assets.return on equity.assetturnover.earnings before interest and taxes.RETURNON EQUITY25. The financial ratio measuredas net income divided by

21、total equity is known as the firm s:profit margin.return on assets.return on equity.assetturnover.earnings before interest and taxes.PRICE-EARNINGSRATIO26. The financial ratio measuredas the price per shareof stock divided by earnings per shareis known as the:return on assets.return on equity.debt-e

22、quity ratio.price-earnings ratio.Du Pont identity.MARKET-TO-BOOKRATIO27. The market-to-book ratio is measuredas:total equity divided by total income times market price per shareof income divided by market price per shareof stock.market price per shareof stock divided by earnings per share.market val

23、ue of equity per sharedivided by book value of equity per share.DU PONT IDENTITY28. The _ breaksdown return on equity into three component parts.Du Pont identityreturn on assetsstatementof cash flowsassetturnover ratioequity multiplierEXTERNALFUNDS NEEDED29. The External Funds Needed(EFN) equation d

24、oes not measuresthe:additional assetrequirements given a change in sales.additional total liabilities financing raised given the changein sales.rate of return to shareholdersgiven the change in income expected to be earned given the change in sales.None of the above.SUSTAINABLEGROWTHRATE30. To calcu

25、late sustainable growth rate, the analyst needsthe:profit margin.payout ratio.debt-to-equity ratio.assetrequirement ratio.All of the above.GROWTH31. Growth can be reconciled with the goal of maximizing firm value:becausegreater growth always adds to value.becausegrowth must be an outcome of decision

26、s that maximize NPV.becausegrowth and wealth maximization arethe same.becausegrowth of any type cannot decreasevalue.none of the above.SUSTAINABLEGROWTH32. Sustainable growth can be determined by the:profit margin, total assetturnover and the price to earnings fit margin, the payout ratio, the debt-

27、to-equity ratio, and the assetrequirement ratio.Total growth less capital gains growth.Either A or B.None of the above.SUSTAINABLEGROWTH33. Which of the following will increasesustainable growth?Buy back existing stock.Decreasedebt.Increase profit margin.Increase assetrequirement ratio.Increase divi

28、dend payout ratio.LONG TERMPLANNING34. The main objective of long-term financial planning models is to:determine the assetrequirements given the investment activities of the firm.plan for contingencies or uncertain events.determine the external financing needs.all of the above are correct.none of th

29、e above are correct.COMMON-SIZEBALANCESHEET35. On a common-size balancesheet,all _accounts areshown asa percentageof:income; total assets.liability; net income.asset;sales.liability; total assets.equity; sales.RATIOANALYSIS36. Which one of the following statementsis correct concerning ratio analysis

30、? a. A single ratio is often computed differently by different individuals.Ratios do not addressthe problem of size differences among firms.There is only a very limited number of ratios which can be used for analytical purposes.Each ratio has a specific formula that is used consistently by all analy

31、sts.Ratios can not be usedfor comparison purposes over periods of time.LIQUIDITYRATIOSa37.Which of the following are liquidity ratios?cash coverage ratiocurrent ratioquick ratioII and III onlyI and II onlyII, III, and IV onlyI, III, and IV onlyI, II, III, and IVLIQUIDITYRATIOSc38.An increasein which

32、 one of the followingwithout affecting its quick ratio?a.accounts payableb.cashc.inventoryd.accounts receivablee.fixed assetsaccountsincreasesa firmscurrent ratioLIQUIDITYRATIOSb39. A supplier, who requires payment within ten days, is most concerned with which one of the following ratios when granti

33、ng credit?currentcashdebt-equityquicktotal debtLONG-TERMSOLVENCYRATIOS40. A firm has a total debt ratio of .47. This meansthat that firm has47 cents in debt for every:$1 in equity.$1 in total sales.$1 in current assets.$.53 in equity.$.53 in total assets.LONG-TERMSOLVENCYRATIOSd41.The long-term debt

34、 ratio is probably of most interest to a firm s:credit customers.employees.suppliers.mortgage holder.shareholders.LONG-TERMSOLVENCYRATIOS42. A banker considering loaning a firm money for ten years would most likely prefer the firm have a debt ratio of _ and a times interest earned ratio of_.a.75; .7

35、5.b.50; 1.00.c.45; 1.75.d.40; 2.50.e.35; 3.00.LONG-TERMSOLVENCYRATIOSb43.From a cashflow position, which one of the followingability to pay the interest on its debts?a.times interest earnedratiob.cash coverage ratioc.cash ratiod.quick erval measureratios bestmeasuresa firmsASSET MANAGEMENT

36、RATIOS44. The higher the inventory turnover measure,the:faster a firm sells its inventory.faster a firm collects payment on its sales.longer it takesa firm to sell its inventory.greater the amount of inventory held by a firm.lesser the amount of inventory held by a firm.ASSET MANAGEMENTRATIOS45. Whi

37、ch one of the following statementsis correct if a firm has a receivables turnover measureof 10?It takes a firm 10 days to collect payment from its customers.It takes a firm 36.5 days to sell its inventory and collect the payment from the sale.It takes a firm 36.5 days to pay its creditors.The firm h

38、as an averagecollection period of 36.5 days.The firm has ten times more in accountsreceivable than it does in cash.ASSET MANAGEMENTRATIOS46. A total assetturnover measureof 1.03 meansthat a firm has$1.03 in:total assetsfor every $1 in cash.total assetsfor every $1 in total debt.total assetsfor every

39、 $1 in equity.salesfor every $1 in total assets.long-term assetsfor every $1 in short-term assets.PROFITABILITYRATIOS47. Puffy sPastries generatesfive cents of net income for every $1 in sales. Thus, Puffy shasa _ of 5 percent.return on assetsreturn on equityprofit marginDu Pont measuretotal assettu

40、rnoverPROFITABILITYRATIOSa48. If a firm producesa 10 percent return on assetsand also a 10 percent return on equity, then the firm:has no debt of any kind.b.is using its assetsas efficiently as possible.has no net working capital.also has a current ratio of 10.has an equity multiplier of 2.PROFITABI

41、LITYRATIOS49. If shareholderswant to know how much profit a firm is making on their entire investment in the firm, the shareholders should look at the:profit margin.return on assets.return on equity.equity multiplier.earnings per share.PROFITABILITYRATIOS50. BGL Enterprises increasesits operating ef

42、ficiency such that costs decreasewhile sales remain constant. As a result, given all else constant, the:return on equity will increase.return on assetswill fit margin will decline.equity multiplier will decrease.price-earnings ratio will increase.PROFITABILITYRATIOS51. The only difference between Jo

43、e sand Moe sis that Joe shas old, fully depreciated equipment. Moe sjust purchasedall new equipment which will be depreciated over eight years. Assuming all else equal:Joe swill have a lower profit margin.Joe swill have a lower return on equity.Moe swill have a higher net income.Moe swill have a low

44、er profit margin.Moe swill have a higher return on assets.MARKETe52.VALUERATIOSLast year, AlfredAutomotives had a price-earnings ratio of 15. This year, the priceearnings ratio is 18. Basedon this information, it can be stated with certainty that:the price per shareincreased.the earnings per sharede

45、creased.investors are paying a higher price for eachshareof stock purchased.investors are receiving a higher rate of return this year.either the price per share,the earnings per share,or both changed.MARKETb53.VALUERATIOTurnerIncs.has a price-earnings ratio of 16. AlfredCos.hasa price-earnings ratio

46、 of19. Thus, you can state with certainty that one shareof stock in Alfred s:a.has a higher market price than one shareof stock in Turner s.b.has a higher market price per dollar of earnings than doesone shareof Turner s.c.sells at a lower price per sharethan one shareof Turner s.d.representsa large

47、r percentageof firm ownership than does one shareof Turnerstocks.e.earnsa greater profit per sharethan doesone shareof Turnerstocks.MARKETVALUE RATIOSb54.Which two of the following are most apt to causea firm to have a higher price-earningsratio?slow industry outlookhigh prospect of firm growthvery

48、low current earningsIV.investors with a low opinion of the firma.I and II onlyb.II and IIIonlyc.II and IVonlyd.I and III onlye.III and IV onlyMARKETVALUERATIOSd 55.VinnieMotorss has a market-to-book ratio of 3. The book value per shareis $4.00.causethe accountantsto increasethe equity of the firm by

49、 an additional $2.increasethe market price per shareby $1.increasethe market price per shareby $12.tend to causethe market price per shareto rise.only affect book values but not market values.MARKETVALUERATIOS56. Which one of the following setsof ratios applies most directly to shareholders?return o

50、n assetsand profit marginquick ratio and times interest earnedprice-earnings ratio and debt-equity ratiomarket-to-book ratio and price-earnings ratiocash coverage ratio and times equity multiplierDU PONT IDENTITYb57.The three parts of the Du Pont identity can be generally described as:operating effi

51、ciency, assetuse efficiency and firm profitability.financial leverage, operating efficiency and assetuse efficiency.the equity multiplier, the profit margin and the total assetturnover.IV. the debt-equity ratio, the capital intensity ratio and the profit margin.I and II onlyII and III onlyI and IV o

52、nlyI and III onlyIII and IV onlyDU PONT IDENTITY58. If a firm decreasestheir operating costs, all elseconstant, then: a. the profit margin increaseswhile the equity multiplier decreases.the return on assetsincreaseswhile the return on equity decreases.the total assetturnover rate decreaseswhile the

53、profit margin increases.both the profit margin and the equity multiplier increase.both the return on assetsand the return on equity increase.EVALUATINGFINANCIALSTATEMENTS59. Which one of the following statementsis correct?Book values should always be given precedenceover market values.Financial stat

54、ementsare frequently the basis used for performance evaluations.Historical information has no value when predicting the future.Potential lenders place little value on financial statementinformation.Reviewing financial information over time has very limited value.EVALUATINGFINANCIALSTATEMENTS60. It i

55、s easierto evaluate a firm using their financial statementswhen the firm:is a conglomerate.is global in nature.usesthe sameaccounting proceduresas other firms in their industry.has a different fiscal year than other firms in their industry.tendsto have one-time events such as assetsalesand property

56、acquisitions.EVALUATINGFINANCIALSTATEMENTSa61. Which two of the following represent the most effective methods of directly evaluating the financial performance of a firm?comparing the current financial ratios to those of the samefirm from prior time periodsII. comparing a firm sfinancial ratios to t

57、hose of other firms in the firm speer group who have similar operationscomparing the financial statementsof the firm to the financial statementsof similarfirms operating in other countriesIV.comparing the financial ratios of the firm to the averageratios of all firms located in the samegeographic ar

58、eaI and II onlyII and III onlyIII and IV onlyI and IV onlyI and III onlyEVALUATINGFINANCIALSTATEMENTSe62.Which of the following represent problems encountered when comparing the financialstatementsof one firm with those of another firm?I.Either one, or both, of the firms may be conglomerates and thu

59、s have unrelated lines ofbusiness.The operations of the two firms may vary geographically.The firms may usediffering accounting methods for inventory purposes.IV. The two firms may be seasonalin nature and have different fiscal year ends.I and II onlyII and III onlyI, III, and IV onlyI, II, and III

60、onlyI, II, III, and IVEXTERNALFUNDS NEEDED63. In the financial planning model, external funds needed(EFN) is equal to changesinassets- (liabilities equity).assets- (liabilities + equity).(assets+ liabilities. equity).(assets+ equity. liabilities).assets- equity.SUSTAINABLEGROWTHRATE64. A firms susta