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Exam 3: Financial Statements and Ratio Analysis

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Question 81

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The ________ ratio is commonly used to assess the owner's appraisal of the share value.

A) debt
B) price/earnings
C) return on equity
D) return on total assets

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Question 82

Multiple Choice

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A firm with sales of $1,000,000, net profits after taxes of $30,000, total assets of $1,500,000, and total liabilities of $750,000 has a return on equity of

A) 20 percent.
B) 15 percent.
C) 3 percent.
D) 4 percent.

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Question 83

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If you were given the average collection period of a firm was currently 45 days, that the average collection of the firm for the past 3 years was 30 days and that the average collection period of the firm's industry for the past few years and currently was 30 days, would you want to know any other information to evaluate the effectiveness of the firm's credit and collection policies?

The Sarbanes-Oxley Act of 2002 was passed to eliminate many of the disclosure and conflict of interest problems of corporations.

Earnings per share represents amount earned during the period on each outstanding share of common stock.

The 2002 Sarbanes-Oxley Act was designed to

The firm's creditors are primarily interested in the short-term liquidity of the company and its ability to make interest and principal payments.

A corporation had year end 2004 and 2005 retained earnings balances of $320,000 and $400,000, respectively. The firm reported net profits after taxes of $100,000 in 2005. The firm paid dividends in 2005 of ________.

The financial leverage multiplier is an indicator of how much ________ a corporation is utilizing.

Table 3.2 Dana Dairy Products Key Ratios Income Statement Dana Dairy Products For the Year Ended December 31, 2010 Balance Sheet Dana Dairy Products December 31, 2010 -The current ratio for Dana Dairy Products in 2005 was ________. (See Table 3.2)

The net value of fixed assets is also called its

The financial leverage multiplier is the ratio of the firm's total assets to stockholders' equity.

The following groups of ratios primarily measure risk.

All of the following are examples of current liabilities EXCEPT

Ag Silver Mining, Inc. has $500,000 of earnings before interest and taxes at the year end. Interest expenses for the year were $10,000. The firm expects to distribute $100,000 in dividends. Calculate the earnings after taxes for the firm assuming a 40 percent tax on ordinary income.

Due to inflationary effects, inventory costs and depreciation write-offs can differ from their true values, thereby distorting profits.

The ________ ratio may indicate that the firm will not be able to meet interest obligations due on outstanding debt.

The ________ measures the percentage of profit earned on each sales dollar before interest and taxes.

Firm ABC had operating profits of $100,000, taxes of $17,000, interest expense of $34,000 and preferred dividends of $5,000. What was the firm's net profit after taxes?

Gross profits are defined as