43) A decrease in which one of the following will increase the return on assets?
A) long-term debt
B) sales
C) inventory
D) retained earnings
E) dividends paid
44) Which one of the following will increase the return on equity?
A) increase in the corporate tax rate
B) decrease in fixed costs
C) issuance of debt to purchase equipment
D) increase in variable costs per unit
E) decrease in net sales
45) Which of the following affect the earnings per share?
I. decrease in interest expense
II. share repurchase
III. increase in tax rates
IV. preferred stock dividend
A) I and III only
B) II and IV only
C) I, II, and III only
D) II, III, and IV only
E) I, II, III, and IV
46) Which one of the following statements related to book value per share (BVPS) is correct?
A) BVPS is equal to total assets divided by the number of shares outstanding.
B) An increase in the market value of a firm’s fixed assets will increase the firm’s BVPS.
C) The payment of a dividend increases BVPS.
D) BVPS is equal to the market price of a share of stock.
E) The issuance of new shares at market value may increase the BVPS.
47) Which one of the following accounts is least likely to vary directly with the level of sales?
A) accounts payable
B) inventory
C) cost of goods sold
D) interest expense
E) accounts receivable
48) Which one of the following is most apt to be constant given the percentage of sales approach
to creating pro forma statements?
A) book value per share
B) gross margin
C) earnings per share
D) return on equity
E) cash flow per share
49) A firm maintains a constant dividend payout ratio of 0.45. What must the plowback ratio be?
A) 1 + 0.45
B) 1 – 0.45
C) 1 × 0.45
D) 1 / 0.45
E) 0.45
50) Which one of the following is most apt to vary directly with sales?
A) current assets
B) long-term debt
C) shareholders’ equity
D) paid-in capital
E) retained earnings
51) Which two of the following are generally used to fund the external financing need?
I. sale of fixed assets
II. increase in accounts payable
III. issuance of long-term debt
IV. sale of equity securities
A) I and II
B) I and III
C) II and III
D) II and IV
E) III and IV
52) The management of the Downtown Athletics recently voted to limit any future borrowing or
sales of company stock. By taking this action, management has effectively done which one of the
following?
A) increased the profit margin
B) lowered income taxes
C) maximized future dividends
D) maximized future retained earnings
E) limited future growth
53) A firm has $3,200 of cash, equipment worth $41,000, inventory of $15,500, $13,200 worth
of patents, and $11,300 of accounts receivable. What is the value of the total current assets?
A) $1,500
B) $14,700
C) $16,700
D) $30,000
E) $72,900
54) A firm has $4,200 of cash, equipment worth $46,300, inventory of $38,400, a building worth
$130,500, and $21,500 of accounts receivable. What is the value of the total fixed assets?
A) $176,800
B) $203,500
C) $196,400
D) $223,100
E) $226,900
55) Young Industries has a 3-year bank loan of $85,000, a 6-month note payable of $6,000, a
$67,300 mortgage, and accounts payable of $22,500. What is the amount of the total current
liabilities? (Ignore the current portion of any long-term debt.)
A) $5,000
B) $16,200
C) $28,500
D) $64,200
E) $117,000
56) ABC Construction, Inc. has buildings and equipment of $315,600, long-term debt of
$154,700, accounts payable of $52,000, cash of $9,800, accounts receivable of $18,300,
inventory of $62,000, and retained earnings of $147,000. What is the total equity of the firm?
A) $5,200
B) $97,000
C) $147,000
D) $199,000
E) $228,000
57) GH Enterprises has annual sales of $5.2 million, depreciation of $350,000, operating
expenses of $390,000, and cost of goods sold of $3.1 million. What is the gross profit?
A) $460,000
B) $850,000
C) $2,100,000
D) $2,650,000
E) $3,710,000
58) Behrend Corporation has annual sales of $4.5 million, depreciation of $425,000, operating
expenses of $679,000, cost of goods sold of $2.3 million, and interest expense of $230,000.
What is the operating income?
A) $1,096,000
B) $2,036,000
C) $3,525,000
D) $4,000,000
E) $4,811,000
59) AccentJewelry, Inc. has annual sales of $4.8 million and a gross profit margin of 55 percent.
The operating expenses are $510,550 and depreciation is $160,250. Interest expense is $80,000
and the tax rate is 35 percent. What is the net income?
A) $1,002,980
B) $1,084,818
C) $1,227,980
D) $1,589,200
E) $2,385,000
60) The Cruise Ship Co. has taxable income of $4,000,000. The company paid out $550,000 in
interest expense. The tax rate is 35 percent and the dividend payout ratio is 30 percent. What is
the amount that was paid out in dividends?
A) $420,000
B) $550,000
C) $682,500
D) $780,000
E) $980,000
61) Handy Man Services, Inc. has net income of $525,000. What is the addition to retained
earnings if the dividend payout ratio is 40 percent?
A) $123,253
B) $157,250
C) $183,750
D) $221,813
E) $315,000
62) HBB Manufacturing, Inc. has 275,000 shares of stock outstanding. The firm paid out
$275,000 in dividends, $195,000 in interest, and added $150,000 to retained earnings for the
year. What is the amount of the earnings per share?
A) $0.70
B) $0.78
C) $1.55
D) $1.63
E) $1.76
63) O’Hara’s Market has net income of $1.6 million and 525,000 shares of stock outstanding.
What is the amount of the dividends per share if the plowback ratio is 60 percent?
A) $0.94
B) $1.07
C) $1.22
D) $1.67
E) $1.98
64) Glassmakers, Inc. purchased $137,600 of new equipment this year and also increased the
inventory by $36,800. Thirty-three thousand dollars worth of old equipment was sold. What is
the investment cash flow for the year?
A) -$49,300
B) -$98,000
C) -$104,600
D) -$125,500
E) -$133,300
65) For the year, Widgets Manufacturing, Inc. increased its current assets accounts by $45,000,
decreased its current liabilities by $37,000, and decreased its fixed assets by $48,000. What is the
investment cash flow for the year?
A) -$31,000
B) -$12,000
C) $19,000
D) $31,000
E) $48,000
66) Healthy Supplements, Inc. paid $7,300 in interest and $4,300 in dividends for the year. The
firm also issued $15,000 worth of new equity securities. What is the amount of the financing
cash flow?
A) $2,500
B) $5,200
C) $6,800
D) $7,700
E) $10,700
67) Whole Wheat Farms, Inc. has a net income of $20,000 and a dividend payout ratio of 30
percent. The firm issued $12,000 worth of common stock during the period. The firm has no
long-term debt. What is the financing cash flow for the period?
A) $2,500
B) $3,000
C) $6,000
D) $9,000
E) $25,000
68) Marley Enterprises has financing cash flow of -$45,200 and investment cash flow of $24,500
for the year. The beginning cash balance was $64,200 and the ending cash balance was $55,100.
What was the operating cash flow for the period?
A) -$15,500
B) -$9,600
C) -$7,700
D) $8,900
E) $11,600
69) A firm has net sales of $35,000, operating expenses of $6,100, depreciation of $1,700, and
cost of goods sold of $18,300. What is the gross margin?
A) 31.1 percent
B) 35.4 percent
C) 47.7 percent
D) 52.9 percent
E) 59.2 percent
70) A firm has net sales of $65,000, operating expenses of $21,300, depreciation of $5,000, cost
of goods sold of $36,500, and interest expense of $4,500. What is the operating margin?
A) -2.8 percent
B) 2.6 percent
C) 3.4 percent
D) 9.2 percent
E) 10.3 percent
71) Sander’s Corner Market had annual sales of $426,000 and total assets of $345,000. What is
the return on assets if the profit margin is 8 percent?
A) 8.23 percent
B) 9.88 percent
C) 10.62 percent
D) 11.01 percent
E) 12.87 percent
72) Wholesale Grocer’s has total assets of $580,000 and total liabilities of $375,000. Net sales
for the year are $523,000 and the profit margin is 10.5 percent. What is the return on equity?
A) 10.6 percent
B) 26.8 percent
C) 31.2 percent
D) 37.4 percent
E) 44.6 percent
73) A firm has a price-cash flow ratio of 12.5 and a price-book value ratio of 7.6. If the cash flow
per share is $4.67, what is the book value per share?
A) $2.84
B) $3.55
C) $4.44
D) $6.45
E) $7.68
74) A company has a price-earnings ratio of 21 and a price-cash flow ratio of 12. If the earnings
per share are $1.75, what is the cash flow per share?
A) $2.16
B) $2.51
C) $3.06
D) $3.14
E) $3.50
75) Green Recycling, Inc. has 150,000 shares of stock outstanding. The firm has total assets of
$568,000 and total liabilities of $415,000. The firm’s stock is selling for $31 a share. What is the
price-book ratio?
A) 22.3
B) 26.5
C) 27.5
D) 30.4
E) 37.8
76) A firm has net income of $22,500 and a book value per share of $3.10. The firm has 30,000
shares of stock outstanding and a price-earnings ratio of 15.9. What is the price-book ratio?
A) 1.7
B) 2.4
C) 2.7
D) 3.8
E) 4.3
77) Children’s Books, Inc. has net income of $50,000 and a plowback ratio of 80 percent. There
are 22,000 shares of stock outstanding at a market price of $18.64 a share. What is the price-
earnings ratio?
A) 6.9
B) 8.2
C) 9.7
D) 11.1
E) 11.6
78) Bay Marina, Inc. has net income of $53,700 and has 30,000 shares of stock outstanding.
Similar firms have a price-earnings ratio of 20. Given this, what should the market price of Bay
Marina, Inc. stock be per share?
A) $28.91
B) $29.29
C) $30.40
D) $33.91
E) $35.80
79) A firm has earnings per share of $3.50 and cash flow per share of $3.84. The price-earnings
ratio is 24.1. What is the price-cash flow ratio?
A) 19.8
B) 20.1
C) 22.0
D) 26.0
E) 27.1
80) A company has net income of $66,000, a price-earnings ratio of 24.1, and 26,000 shares of
stock outstanding. If the price-cash flow ratio is 19, what is the cash flow per share?
A) $2.05
B) $2.34
C) $2.50
D) $2.81
E) $3.22