FINA 4383 Quizzes

FINA 4383 Quizzes
______ may indicate a firm is experiencing stockouts and lost sales

a. Average payment period
b. Inventory turnover ratio
c. Average collection period
d. Quick ratio
______ ration in indicates that a firm will be able to meet interest
obligations due on outstanding debt
a. Debt-to-equity
b. Interest turnover
c. Total assets turnover
d. Times interest earned
Present and prospective shareholders are mainly concerned with a firms
____.
a. Risk and return
b. Leverage
c. Asset Turnover
d. Liquidity
Company A has high Operating Income Margin, but low Net Profit Margin.
Which one of the following rations is the most interested in looking into?
(Assume that unified corporate tax is applied to all firms)
a. Total Asset Turnover
b. Return on Asset Ratio
c. Interest Coverage Ratio
d. Price-to-earning ratio
____ measures the percentage of each sales dollar remaining after all costs
and expenses, including interest, taxes and preferred stock dividends, have
been deducted
a. Net profit margin
b. Operating profit margin
c. Gross profit margin
d. Earnings available to common shareholders
The current ratio for Dana Diary Products in 2013 was____.
a. 1.58
b. 0.63
c. 1.10
d. 0.91
A decline in affirms inventory turnover ratio suggest that it is improving both
its inventory management and its liquidity position, i.e., that it is becoming
more liquid
a. True
b. False
2
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 increase in its leverage
A firms new president wants to strengthen the company’s financial position.
Which of the following actions would make it financially stronger?
a. Increase accounts receivable while holding sales constant
b. Increase EBIT while holding sales and assets constant
c. Increase accounts payable while holding sales constant
d. Increase inventories while holding sales constant.
High current and quick ratios always indicate that the firm is managing its
liquidity position well.
a. True
b. False
3
You obtain the 2015 financial statements of Ford Motor Company and find
out Ford has a fairly high fixed-assets-turnover ratio relative to the prior 10
years. Which one of the following statements is the most relevant prediction
on Ford in the near future?
a. Ford Motor Company may reduce price of the car due to slow
sales of cars
b. Ford Motor Company may need major capital expenditure
c. Ford Motor Company may lay off some workers
d. Ford Motor Company may experience serious liquidity problem
Convex Industries has inventories of $218 million, current assets of $1.4
billion, and current liabilities of $504 million. What is its quick ration?
a. 1.17
b. 0.94
c. 2.81
d. 2.35
The primary concern of creditors when assessing the strength of a firm is its
____.
a. Profitability
b. Leverage
c. Short-term liquidity
d. Share price
The DuPoint formula allows a firm to break down its return into the net
profit margin, which measures the firms profitability on sales, and its total
asset turnover, which indicated how efficiently the firm has used its assets
to generate sales.
a. True
b. False
4
The balance sheet and income statement shown below are for Koski Inc.
Note that the firm has no amortization charges, it does not lease any assets,
none of its debt must be retired during the next 5 years, and the notes
payable will be rolled over.
What is the firms average account receivable collection period? Assume a

365-day year for this calculation.
a. 39.07
b. 41.13
c. 43.29
d. 47.97
5
The above diagram shows a b/s for a certain company. All quantities shown
are in millions of dollars. What is the company’s net working capital?
a. $133 million
b. $2 million
c. $89 million
d. $45 million
Due to the COVID-19, UTRGV decides to replace 50% of face-to-face online
classes in 2021. Because of this conversion, UTRGV decides to sell or get rid
of technology equipment installed in classrooms, while the number of
students remain constant over two academic periods. Which one of the
following statements is the most relevant expectation on UTRGV’s financial
statement in 2021 compared to the one in 2020?
a. Lower net profit margin
b. Lower debt ratio
c. Higher quick ratio
6
d. Higher fixed asset turnover
A firms total asset turnover increased from 0.75 to 0.90. Which of the
following is true about the given data?
a. Its assets have been efficiently used to derive the optimum level
of sales
b. Its assets have been efficiently used to derive the optimum of
net income
c. Its assets have been efficiently used to derive the minimum of
net income
d. Its assets have been efficiently used to derive the minimum of
gross profit
A company understates year-end account receivable. As compared to the
properly stated year-end results, what effect will this understatement have
on the companies Account Receivable turnover ratio and Current Ratio,
respectively?
a. Account Receivable Turnover: Overstated/ Current Ratio:
Understated
b. Account Receivable Turnover: Understated/ Current Ratio:
Overstated
c. Account Receivable Turnover: Overstated/ Current Ratio:
Overstated
d. Account Receivable Turnover: Understated / Current Ratio:
Understated
A firm has a current ratio of 1; in order to improve its liquidity ratios, this
firm might ___.
a. Improve its collection practices by providing extended credit
policy.
b. Improve its collection practices and pay accounts payable,
thereby decreasing current liabilities and decreasing the current
and quick ratios.
7
c. Decrease current liabilities by utilizing more long-term debt,
thereby increasing the current and quick ratios.
d. Increase inventory, thereby increasing current assets and the
current and quick ratios.
What can a company do to shorten its cash conversion cycle?
a. Turn inventory over as quickly as possible
b. Collect amount receivables as quickly as possible
c. Pay accounts as slowly as possible
d. All of the above
A firm with sales of $1,000,000 net profits after taxes of $30,000, total
assets of $1,500,000, and common stockholders investment of $750,000 has
a return on equity of ____.
a. 20%
b. 15%
c. 3%
d. 4%
A firm with a total asset turnover lower than industry standard may have
____.
a. Excessive debt
b. Excessive interest costs
c. Insufficient sales
d. Insufficient fixed assets
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 since its market value is worth less than its book value
c. The firms market value is more than its book value
d. The value of the firm’s assets is greater than their liquidation
value
8
The balance sheet and income statement shown below are for Koski Inc.
Note that the firm has no amortization charges, it does not lease any assets,
none of its debt must be retired during the next 5 years, and the notes
payable will be rolled over.
What is the firms inventory turnover ratio?

a. 5.47
9
b. 5.74
c. 6.03
d. 6.33
COGS/Inv= Inventory turnover
10

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FINA 4383 Quizzes

______ may indicate a firm is experiencing stockouts and lost sales

What is the firms average account receivable collection period? Assume a

What is the firms inventory turnover ratio?

COGS/Inv= Inventory turnover

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