2023年公司理财英文版题库.doc

CHAPTER 3
Financial Statement Analysis, Planning, and Growth

Multiple Choice Questions:

I. DEFINITIONS

LONG-TERM PLANNING
c 1. One key reason a long-term financial plan is developed is because:
a. the plan determines your financial policy.
b. the plan determines your investment policy.
c. there are direct connections between achievable corporate growth and the financial policy.
d. there is unlimited growth possible in a well-developed financial plan.
e. None of the above.

PRO FORMA STATEMENTS
b 2. Projected future financial statements are called:
a. plug statements.
b. pro forma statements.
c. reconciled statements.
d. aggregated statements.
e. none of the above.

PERCENTAGE OF SALES
e 3. The percentage of sales method:
a. requires that all accounts grow at the same rate.
b. separates accounts that vary with sales and those that do not vary with sales.
c. allows the analyst to calculate how much financing the firm will need to support the predicted sales level.
d. Both A and B.
e. Both B and C.

COMMON-SIZE STATEMENTS
e 4. A _____ standardizes items on the income statement and balance sheet as a percentage of total sales and total assets, respectively.
a. tax reconciliation statement
b. statement of standardization
c. statement of cash flows
d. common-base year statement
e. common-size statement

FINANCIAL RATIOS
a 5. Relationships determined from a firm’s financial information and used for comparison purposes are known as:
a. financial ratios.
b. comparison statements.
c. dimensional analysis.
d. scenario analysis.
e. solvency analysis.

SHORT-TERM SOLVENCY RATIOS
c 6. Financial ratios that measure a firm’s ability to pay its bills over the short run without undue stress are known as _____ ratios.
a. asset management
b. long-term solvency
c. short-term solvency
d. profitability
e. market value

CURRENT RATIO
b 7. The current ratio is measured as:
a. current assets minus current liabilities.
b. current assets divided by current liabilities.
c. current liabilities minus inventory, divided by current assets.
d. cash on hand divided by current liabilities.
e. current liabilities divided by current assets.

QUICK RATIO
d 8. The quick ratio is measured as:
a. current assets divided by current liabilities.
b. cash on hand plus current liabilities, divided by current assets.
c. current liabilities divided by current assets, plus inventory.
d. current assets minus inventory, divided by current liabilities.
e. current assets minus inventory minus current liabilities.

CASH RATIO
e 9. The cash ratio is measured as:
a. current assets divided by current liabilities.
b. current assets minus cash on hand, divided by current liabilities.
c. current liabilities plus current assets, divided by cash on hand.
d. cash on hand plus inventory, divided by current liabilities.
e. cash on hand divided by current liabilities.

LONG-TERM SOLVENCY RATIOS
b 10. Ratios that measure a firm’s financial leverage are known as _____ ratios.
a. asset management
b. long-term solvency
c. short-term solvency
d. profitability
e. market value

TOTAL DEBT RATIO
a 11. The financial ratio measured as total assets minus total equity, divided by total assets, is the:
a. total debt ratio.
b. equity multiplier.
c. debt-equity ratio.
d. current ratio.
e. times interest earned ratio.

DEBT-EQUITY RATIO
c 12. The debt-equity ratio is measured as total:
a. equity minus total debt.
b. equity divided by total debt.
c. debt divided by total equity.
d. debt plus total equity.
e. debt minus total assets, divided by total equity.

EQUITY MULTIPLIER
e 13. The equity multiplier ratio is measured as total:
a. equity divided by total assets.
b. equity plus total debt.
c. assets minus total equity, divided by total assets.
d. assets plus total equity, divided by total debt.
e. assets divided by total equity.

TIMES INTEREST EARNED RATIO
c 14. The financial ratio measured as earnings before interest and taxes, divided by interest expense is the:
a. cash coverage ratio.
b. debt-equity ratio.
c. times interest earned ratio.
d. gross margin.
e. total debt ratio.

CASH COVERAGE RATIO
a 15. The financial ratio measured as earnings before interest and taxes, plus depreciation, divided by interest expense, is the:
a. cash coverage ratio.
b. debt-equity ratio.
c. times interest earned ratio.
d. gross margin.
e. total debt ratio.

ASSET MANAGEMENT RATIOS
a 16. Ratios that measure how efficiently a firm uses its assets to generate sales are known as _____ ratios.
a. asset management
b. long-term solvency
c. short-term solvency
d. profitability
e. market value

INVENTORY TURNOVER
c 17. The inventory turnover ratio is measured as:
a. total sales minus inventory.
b. inventory times total sales.
c. cost of goods sold divided by inventory.
d. inventory times cost of goods sold.
e. inventory plus cost of goods sold.

DAYS’ SALES IN INVENTORY
e 18. The financial ratio days’ sales in inventory is measured as:
a. inventory turnover plus 365 days.
b. inventory times 365 days.
c. inventory plus cost of goods sold, divided by 365 days.
d. 365 days divided by the inventory.
e. 365 days divided by the inventory turnover.

RECEIVABLES TURNOVER
b 19. The receivables turnover ratio is measured as:
a. sales plus accounts receivable.
b. sales divided by accounts receivable.
c. sales minus accounts receivable, divided by sales.
d. accounts receivable times sales.
e. accounts receivable divided by sales.

DAYS’ SALES IN RECEIVABLES
d 20. The financial ratio days’ sales in receivables is measured as:
a. receivables turnover plus 365 days.
b. accounts receivable times 365 days.
c. accounts receivable plus sales, divided by 365 days.
d. 365 days divided by the receivables turnover.
e. 365 days divided by the accounts receivable.

TOTAL ASSET TURNOVER
b 21. The total asset turnover ratio is measured as:
a. sales minus total assets.
b. sales divided by total assets.
c. sales times total assets.
d. total assets divided by sales.
e. total assets plus sales.

PROFITABILITY RATIOS
d 22. Ratios that measure how efficiently a firm’s management uses its assets and equity to generate bottom line net income are known as _____ ratios.
a. asset management
b. long-term solvency
c. short-term solvency
d. profitability
e. market value

PROFIT MARGIN
a 23. The financial ratio measured as net income divided by sales is known as the firm’s:
a. profit margin.
b. return on assets.
c. return on equity.
d. asset turnover.
e. earnings before interest and taxes.

RETURN ON ASSETS
b 24. The financial ratio measured as net income divided by total assets is known as the firm’s:
a. profit margin.
b. return on assets.
c. return on equity.
d. asset turnover.
e. earnings before interest and taxes.

RETURN ON EQUITY
c 25. The financial ratio measured as net income divided by total equity is known as the firm’s:
a. profit margin.
b. return on assets.
c. return on equity.
d. asset turnover.
e. earnings before interest and taxes.

PRICE-EARNINGS RATIO
d 26. The financial ratio measured as the price per share of stock divided by earnings per share is known as the:
a. return on assets.
b. return on equity.
c. debt-equity ratio.
d. price-earnings ratio.
e. Du Pont identity.

MARKET-TO-BOOK RATIO
e 27. The market-to-book ratio is measured as:
a. total equity divided by total assets.
b. net income times market price per share of stock.
c. net income divided by market price per share of stock.
d. market price per share of stock divided by earnings per share.
e. market value of equity per share divided by book value of equity per share.

DU PONT IDENTITY
a 28. The _____ breaks down return on equity into three component parts.
a. Du Pont identity
b. return on assets
c. statement of cash flows
d. asset turnover ratio
e. equity multiplier

EXTERNAL FUNDS NEEDED
c 29. The External Funds Needed (EFN) equation does not measures the:
a. additional asset requirements given a change in sales.
b. additional total liabilities financing raised given the change in sales.
c. rate of return to shareholders given the change in sales.
d. net income expected to be earned given the change in sales.
e. None of the above.

SUSTAINABLE GROWTH RATE
e 30. To calculate sustainable growth rate, the analyst needs the:
a. profit margin.
b. payout ratio.
c. debt-to-equity ratio.
d. asset requirement ratio.
e. All of the above.

GROWTH
b 31. Growth can be reconciled with the goal of maximizing firm value:
a. because greater growth always adds to value.
b. because growth must be an outcome of decisions that maximize NPV.
c. because growth and wealth maximization are the same.
d. because growth of any type cannot decrease value.
e. none of the above.

SUSTAINABLE GROWTH
b 32. Sustainable growth can be determined by the:
a. profit margin, total asset turnover and the price to earnings ratio.
b. profit margin, the payout ratio, the debt-to-equity ratio, and the asset requirement ratio.
c. Total growth less capital gains growth.
d. Either A or B.
e. None of the above.

SUSTAINABLE GROWTH
c 33. Which of the following will increase sustainable growth?
a. Buy back existing stock.
b. Decrease debt.
c. Increase profit margin.
d. Increase asset requirement ratio.
e. Increase dividend payout ratio.

LONG TERM PLANNING
d 34. The main objective of long-term financial planning models is to:
a. determine the asset requirements given the investment activities of the firm.
b. plan for contingencies or uncertain events.
c. determine the external financing needs.
d. all of the above are correct.
e. none of the above are correct.

COMMON-SIZE BALANCE SHEET
d 35. On a common-size balance sheet, all _____accounts are shown as a percentage of:
a. income; total assets.
b. liability; net income.
c. asset; sales.
d. liability; total assets.
e. equity; sales.

RATIO ANALYSIS
a 36. Which one of the following statements is correct concerning ratio analysis?
a. A single ratio is often computed differently by different individuals.
b. Ratios do not address the problem of size differences among firms.
c. There is only a very limited number of ratios which can be used for analytical purposes.
d. Each ratio has a specific formula that is used consistently by all analysts.
e. Ratios can not be used for comparison purposes over periods of time.

LIQUIDITY RATIOS
a 37. Which of the following are liquidity ratios?
I. cash coverage ratio
II. current ratio
III. quick ratio
IV. inventory turnover
a. II and III only
b. I and II only
c. II, III, and IV only
d. I, III, and IV only
e. I, II, III, and IV

LIQUIDITY RATIOS
c 38. An increase in which one of the following accounts increases a firm’s current ratio without affecting its quick ratio?
a. accounts payable
b. cash
c. inventory
d. accounts receivable
e. fixed assets

LIQUIDITY RATIOS
b 39. A supplier, who requires payment within ten days, is most concerned with which
one of the following ratios when granting credit?
a. current
b. cash
c. debt-equity
d. quick
e. total debt

LONG-TERM SOLVENCY RATIOS
d 40. A firm has a total debt ratio of .47. This means that that firm has 47 cents in debt for every:
a. $1 in equity.
b. $1 in total sales.
c. $1 in current assets.
d. $.53 in equity.
e. $.53 in total assets.

LONG-TERM SOLVENCY RATIOS
d 41. The long-term debt ratio is probably of most interest to a firm’s:
a. credit customers.
b. employees.
c. suppliers.
d. mortgage holder.
e. shareholders.

LONG-TERM SOLVENCY RATIOS
e 42. 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; .75.
b. .50; 1.00.
c. .45; 1.75.
d. .40; 2.50.
e. .35; 3.00.

LONG-TERM SOLVENCY RATIOS
b 43. From a cash flow position, which one of the following ratios best measures a firm’s
ability to pay the interest on its debts?
a. times interest earned ratio
b. cash coverage ratio
c. cash ratio
d. quick ratio
e. interval measure

ASSET MANAGEMENT RATIOS
a 44. The higher the inventory turnover measure, the:
a. faster a firm sells its inventory.
b. faster a firm collects payment on its sales.
c. longer it takes a firm to sell its inventory.
d. greater the amount of inventory held by a firm.
e. lesser the amount of inventory held by a firm.

ASSET MANAGEMENT RATIOS
d 45. Which one of the following statements is correct if a firm has a receivables turnover measure of 10?
a. It takes a firm 10 days to collect payment from its customers.
b. It takes a firm 36.5 days to sell its inventory and collect the payment from the sale.
c. It takes a firm 36.5 days to pay its creditors.
d. The firm has an average collection period of 36.5 days.
e. The firm has ten times more in accounts receivable than it does in cash.

ASSET MANAGEMENT RATIOS
d 46. A total asset turnover measure of 1.03 means that a firm has $1.03 in:
a. total assets for every $1 in cash.
b. total assets for every $1 in total debt.
c. total assets for every $1 in equity.
d. sales for every $1 in total assets.
e. long-term assets for every $1 in short-term assets.

PROFITABILITY RATIOS
c 47. Puffy’s Pastries generates five cents of net income for every $1 in sales. Thus,
Puffy’s has a _____ of 5 percent.
a. return on assets
b. return on equity
c. profit margin
d. Du Pont measure
e. total asset turnover

PROFITABILITY RATIOS
a 48. If a firm produces a 10 percent return on assets and also a 10 percent return on
equity, then the firm:
a. has no debt of any kind.
b. is using its assets as efficiently as possible.
c. has no net working capital.
d. also has a current ratio of 10.
e. has an equity multiplier of 2.

PROFITABILITY RATIOS
c 49. If shareholders want to know how much profit a firm is making on their entire
investment in the firm, the shareholders should look at the:
a. profit margin.
b. return on assets.
c. return on equity.
d. equity multiplier.
e. earnings per share.

PROFITABILITY RATIOS
a 50. BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant. As a result, given all else constant, the:
a. return on equity will increase.
b. return on assets will decrease.
c. profit margin will decline.
d. equity multiplier will decrease.
e. price-earnings ratio will increase.

PROFITABILITY RATIOS
d 51. The only difference between Joe’s and Moe’s is that Joe’s has old, fully depreciated