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1. Which of the following assets is most liquid?
2.
Cost of goods sold
refers to ___________.
3. Many observers believe that firms "manage" their income statements to _______.
4. Depreciation expense is in what broad category of expenditures?
5. Firm A acquires firm B when firm B has a book value of assets of $155 million and a book
value of liabilities of $35 million. Firm A actually pays $175 million for firm B. This purchase would
result in goodwill for firm A equal to _____.
6. One of the biggest impediments to a global capital market has been _________.
7. Benjamin Graham thought that the benefits from detailed analysis of a firm's financial
statements had _________ over his long professional life.
8. If the interest rate on debt is higher than the ROA, then a firm's ROE will _________.
9. Which of the following is
not
one of the three key financial statements available to
investors in publicly traded firms?
10. In 2006 Hewlett-Packard repurchased shares of common stock worth $5,241 million and
made dividend payments of $894 million. Other financing activities raised $196 million, and
Hewlett-Packard's total cash flow from financing was -$6,077 million. How much did the long-
term debt accounts of Hewlett-Packard change?
11.
What must cash flow from financing have been in 2008 for Interceptors, Inc.?
12.
Based on the cash flow data in the table for Interceptors Inc., which of the following statements is
(are) correct?
I. This firm appears to be a good investment because of its steady growth in cash.
II. This firm has been able to generate growing cash flows only by borrowing or selling equity to
offset declining operating cash flows.
III. Financing activities have been increasingly important for this firm's operations, at least in the
short run.
13. Common-size balance sheets are prepared by dividing all quantities by ____________.
14. Operating ROA is calculated as __________, while ROE is calculated as _________.
15. A firm increases its financial leverage when its ROA is greater than the cost of debt.
Everything else equal, this change will probably increase the firm's:
I. Beta
II. Earnings variability over the business cycle
III. ROE
IV. Stock price
16. The highest possible value for the interest-burden ratio is ______, and this occurs when
the firm _________.
17. Which one of the following ratios is used to calculate the times-interest-earned ratio?
18. The process of decomposing ROE into a series of component ratios is called
______________.
19. Which of the following is
not
a ratio used in the DuPont analysis?
20. By 2008, over 100 countries had adopted financial reporting standards that are in
conformance with ________.
21. Operating ROA can be found as the product of ______.
22. A firm has an ROE of 20% and a market-to-book ratio of 2.38. Its P/E ratio is _________.
23. If a firm has a positive tax rate and a positive operating ROA, and the interest rate on debt
is the same as the operating ROA, then operating ROA will be _________.
24. You find that a firm that uses debt has a compound leverage factor less than 1. This tells
you that ________.
25. A firm has a P/E ratio of 24 and an ROE of 12%. Its market-to-book-value ratio is
_________.
26. A firm has an ROA of 8% and a debt/equity ratio of .5; its ROE is _________.
27. A firm has a tax burden of .7, a leverage ratio of 1.3, an interest burden of .8, and a return-
on-sales ratio of 10%. The firm generates $2.28 in sales per dollar of assets. What is the firm's
ROE?
28. Economic value added (EVA) is:
29. Which of the following statements is true concerning economic value added?
30. The financial statements of Flathead Lake Manufacturing Company are shown below:
Note: The common shares are trading in the stock market for $15 per share
Refer to the financial statements of Flathead Lake Manufacturing Company. The firm's current
ratio for 2012 indicates that Flathead's liquidity has ________ since 2011.
31. The financial statements of Flathead Lake Manufacturing Company are shown below:
Note: The common shares are trading in the stock market for $15 per share
Refer to the financial statements of Flathead Lake Manufacturing Company. The firm's inventory
turnover ratio is _________. (Please keep in mind that when a ratio involves both income
statement and balance sheet numbers, the balance sheet numbers for the beginning and end of
the year must be averaged.)
32. The financial statements of Flathead Lake Manufacturing Company are shown below:
Note: The common shares are trading in the stock market for $15 per share
Refer to the financial statements of Flathead Lake Manufacturing Company. The firm's debt-to-
equity ratio for 2012 is _________.
