While screening hundreds of companies for investment opportunities, you come across
Apex Corp. It is rated AA by the major rating agencies and has a low Altman’s Z-score
of 1.15. You want to do detailed analysis, but you preliminarily conclude:
A. Apex debt is overvalued.
B. Apex stock should appreciate over the short-term.
C. Apex has untapped growth potential.
D. None of the above
If a company wishes to increase its current ratio, it could:
A. take out a short-term loan.
B. decrease investments in fixed assets.
C. increase useful life of machinery.
D. sell a fixed asset.
Which exchange rates are used for foreign subsidiaries with different functional
currencies? Using the following abbreviations identify which of the below are correct
methods for converting accounts receivable.
Year-end rates: YE
Average rates: AR
Historical rates: HR
A. Option A
B. Option B
C. Option C
D. Option D
What is Dell’s profit margin for 2006?
A. 6.27%
B. 6.18%
C. 6.38%
D. 6.86%
Cash collected from customers for the year ended December 31, 2005, is:
A. $9,480.
B. $9,430.
C. $8,930.
D. $8,980.
Undie Inc. has many foreign operations and uses the U.S. dollar as its functional
currency worldwide. Which of the following statements is true with respect to foreign
operations?
A. All assets and liabilities are translated at current exchange rates.
B. Monetary assets and liabilities are translated at current exchange rates.
C. Translation gains and losses are reported in equity section of balance sheet.
D. Non-monetary assets and liabilities are translated at average exchange rates for the
year.
What will be the diluted EPS if average stock price during the year is $15 and treasury
shares that can be purchased are 6,000?
A. $3
B. $5
C. $6
D. $4.17
Analysis of a company’s assets will help evaluate its:
I. liquidity.
II. solvency.
III. operational capacity.
IV. financing ability.
A. I, II, III, and IV
B. I, II, and IV
C. II, III, and IV
D. I, II, and III
Pauly Co. reports a foreign currency translation gain of $5 million in its statement of
shareholders’ equity. From this, you can infer that:
A. they have foreign operations where the U.S. dollar is the functional currency.
B. they have foreign operations where local currency is the functional currency.
C. they entered into a foreign currency transaction that year.
D. None of the above
Which of the following is true with respect to extraordinary items?
I. Extraordinary items are recorded net of tax in income statement.
II. Extraordinary items, by definition, are probable and unusual in nature.
III. By definition, gains and losses from strikes are always extraordinary.
IV. By definition, gains and losses from sale of property, plant and equipment are never
extraordinary.
A. I and IV
B. I, III, and IV
C. II and IV
D. I, II, and III
Which of the following transactions or events would have no immediate effect on the
times interest earned ratio but will cause debt to equity ratio to decrease?
A. Issuing new debt
B. Issuing new equity
C. Having a stock split
D. Recording large contingent liability for lawsuit