Chapter 28 Financial Analysis

1. The following groups are stakeholders of a public company:

I) Shareholders
II) The government
III) Suppliers
IV) Employees
V) Bondholders
VI) Management
A. I and II only
B. I, II, and III only
C. I, II, III, and IV only
D. I, II, III, IV, V, and VI

5. The following are known as current assets:

I) Cash
II) Marketable securities
III) Receivables
IV) Inventories
V) Payables
A. I, II and III only
B. I, II, III and IV only
C. II, III, IV and V only
D. III, IV and V only

6. The difference between Total Assets of a firm and its Total Liabilities is called.
A. Net working capital
B. Net current assets
C. Net worth
D. None of the above

7. Inventory consists of:

A. finished goods
B. raw material and finished goods
C. raw material, work in process, and finished goods
D. none of the above

8. The difference between Current Assets of a firm and its Current Liabilities is called.
A. Net worth
B. Net working capital
C. Gross working capital
D. None of the above
10. Earnings before interest and taxes is calculated as:
A. Total revenues-costs
B. Total revenues-costs-depreciation
C. Total revenues-costs-depreciation-taxes
D. None of the above

13. If the debt ratio is 0.5 what is the debt-equity ratio? (assume no leases)
A. 0.5
B. 1.0
C. 2.0
D. 4.0

14. Which of the following is an example of leverage ratios?

A. Debt-Equity ratio
B. Quick ratio
C. Payout ratio
D. Return on equity

15. Given the following data: Long term debt = 100; Value of leases = 20; Book value of
equity = 80; Market value of equity = 100, calculate the debt ratio.
A. 0.56
B. 0.50
C. 0.55
D. 0.60

16. Given the following data: Long term debt = 100; Value of leases = 20; Book value of
equity = 80; Market value of equity = 100, calculate the debt-equity ratio.
A. 0.50
B. 0.60
C. 1.50
D. 1.0

17. Given the following data: EBIT = 100; Depreciation = 40; Interest = 20; Dividends = 10;
calculate the Times Interest Earned (TIE) ratio.
A. 7.0
B. 5.0
C. 4.7
D. 14.0
18. Which of the following is an example of liquidity ratios?
A. Times interest earned (TIE)
B. P/E ratio
C. Return on equity
D. Quick ratio

19. Given the following data: Current assets = 500; Current liabilities = 250; Inventory = 200;
Account receivables = 200; calculate the current ratio:
A. 2.0
B. 1.0
C. 1.5
D. None of the above

20. Given the following data: Current assets = 500; Current liabilities = 250; Inventory = 200;
Account receivables = 200; calculate the quick ratio:
A. 1.0
B. 2.0
C. 1.2
D. None of the above

21. Given the following data: Current assets = 500; Current liabilities = 250; Inventory = 200;
Account receivables = 200; calculate the cash ratio: (assume that the firm has no marketable
securities)
A. 0.4
B. 2.0
C. 1.5
D. None of the above

22. Given the following data: Sales = 3200; Cost of goods sold = 1600; Average total assets =
1600; Average inventory = 200, calculate the asset turnover ratio:
A. 2.0
B. 0.9375
C. 1.33
D. None of the above

27. Given the following data: EBIT = 400; Tax = 100; Sales = 3000; Average Total Assets =
1500, calculate net profit margin:
A. 10%
B. 18.3%
C. 7.5%
D. None of the above
31. Given the following data: Earnings per share = $5; Dividends per share = $3; Price per
share = $50. calculate the dividend yield:
A. 10%
B. 5%
C. 60%
D. None of the above

32. Given the following data: Earnings per share = $6; Dividends per share = $3; Price per
share = $60, calculate the P/E ratio:
A. 16.7
B. 10
C. 25
D. None of the above