Q&A Hero

Q: Each listed stock option contract gives the holder the right to buy or sell ________ shares of stock. A) 1 B) 10 C) 100 D) 1,000

Q: Advantages of exchange-traded options over OTC options include all but which one of the following? A) ease and low cost of trading B) anonymity of participants C) contracts that are tailored to meet the needs of market participants D) no concerns about counterparty credit risk

Q: The writer of a put option ________. A) agrees to sell shares at a set price if the option holder desires B) agrees to buy shares at a set price if the option holder desires C) has the right to buy shares at a set price D) has the right to sell shares at a set price

Q: Exchange-traded stock options expire on the ________ of the expiration month. A) second Monday B) third Wednesday C) second Thursday D) third Friday

Q: A futures call option provides its holder with the right to ________. A) purchase a particular stock at some time in the future at a specified price B) purchase a futures contract for the delivery of options on a particular stock C) purchase a futures contract at a specified price for a specified period of time D) deliver a futures contract and receive a specified price at a specific date in the future

Q: The initial maturities of most exchange-traded options are generally ________. A) less than 1 year B) less than 2 years C) between 1 and 2 years D) between 1 and 3 years

Q: Longer-term American-style options with maturities of up to 3 years are called ________. A) warrants B) LEAPS C) GICs D) CATs

Q: You write a put option on a stock. The profit at contract maturity of the option position is ________, where X equals the option's strike price, ST is the stock price at contract expiration, and P0 is the original premium of the put option. A) max (P0, X − ST − P0) B) min (−P0, X − ST − P0) C) min (P0, ST − X + P0) D) max (0, ST − X − P0)

Q: Strips and straps are variations of ________. A) straddles B) collars C) money spreads D) time spreads

Q: You purchase a call option on a stock. The profit at contract maturity of the option position is ________, where X equals the option's strike price, ST is the stock price at contract expiration, and C0 is the original purchase price of the option. A) max (−C0, ST − X − C0) B) min (−C0, ST − X − C0) C) max (C0, ST − X + C0) D) max (0, ST − X − C0)

Q: A quanto provides its holder with the right to ________. A) participate in the payoffs from a portfolio of gambling casino stocks B) exchange a fixed amount of a foreign currency for dollars at a specified exchange rate C) participate in the investment performance of a foreign security D) exchange the payoff from a foreign investment for dollars at a fixed exchange rate

Q: Which of the following statements about convertible bonds are true? I. The conversion price does not change over time. II. The associated stocks may not pay dividends as long as the bonds are outstanding. III. Most convertibles are also callable at the discretion of the firm. IV. They may be thought of as straight bonds plus a call option. A) I and III only B) I and IV only C) I, II, and IV only D) III and IV only

Q: A time spread may be executed by ________. A) selling an option with one exercise price and buying a similar one with a different exercise price B) buying two options that have the same expiration dates but different strike prices C) selling two options that have the same expiration dates but different strike prices D) selling an option with one expiration date and buying a similar option with a different expiration date

Q: An Asian put option gives its holder the right to ________. A) buy the underlying asset at the exercise price on or before the expiration date B) buy the underlying asset at a price determined by the average stock price during some specified portion of the option's life C) sell the underlying asset at the exercise price on or before the expiration date D) sell the underlying asset at a price determined by the average stock price during some specified portion of the option's life

Q: An Asian call option gives its holder the right to ________. A) buy the underlying asset at the exercise price on or before the expiration date B) buy the underlying asset at a price determined by the average stock price during some specified portion of the option's life C) sell the underlying asset at the exercise price on or before the expiration date D) sell the underlying asset at a price determined by the average stock price during some specified portion of the option's life

Q: An American put option gives its holder the right to ________. A) buy the underlying asset at the exercise price on or before the expiration date B) buy the underlying asset at the exercise price only at the expiration date C) sell the underlying asset at the exercise price on or before the expiration date D) sell the underlying asset at the exercise price only at the expiration date

Q: At contract maturity the value of a put option is ________, where X equals the option's strike price and ST is the stock price at contract expiration. A) max (0, ST − X) B) min (0, ST − X) C) max (0, X − ST) D) min (0, X − ST)

Q: When choosing a benchmark, it is best to use ________. A) numerous firms in the same industry B) your number one competitor C) the aspirational firm you wish to emulate D) standards established by the FASB

Q: According the Financial Accounting Standards Board's Statement No. 157 on fair value accounting, Level 3 assets ________. A) must be reduced to book value B) must be compared to market valuations C) are hardest to value D) are easiest to value

Q: The impact of using LIFO over FIFO is to ________. A) bias ROE downward since investments are undervalued B) bias ROE downward since investments are overvalued C) bias ROE upward since investments are undervalued D) bias ROE upward since investments are overvalued

Q: If a firm's borrowing rate exceeds its ROA, then ROE will ________. A) increase by an amount that depends on the equity/debt ratio. B) increase by an amount that depends on the debt/equity ratio. C) decline by an amount that depends on the equity/debt ratio. D) decline by an amount that depends on the debt/equity ratio.

Q: A firm has a compound leverage factor greater than 1; this indicates that ________. A) the firm has no interest payments B) the firm uses less debt as a percentage of financing C) the firm's interest payments are equal to the firm's pretax profits D) the firm's debt has a positive contribution to the firm's ROA

Q: The firm's leverage ratio is 1.2, interest-burden ratio is 0.81, and profit margin is 0.24, and its asset turnover is 1.25. What is the firm's ROA? A) 0.25 B) 0.3 C) 0.335 D) 0.372

Q: The quick ratio is a measure of a firm's ________. A) asset turnover B) market valuation C) liquidity D) interest burden

Q: The major difference between IFRS and GAAP is that U.S. standards are ________ and IFRS standards are ________. A) strictly enforced; weakly enforced B) rules-based; principles-based C) evolutionary; devolutionary D) based on government standards; based on corporate practice

Q: The tax burden of the firm is 0.5, the interest burden is 0.55, the profit margin is 0.25, the asset turnover is 1.5, and the leverage ratio is 1.65. What is the ROE of the firm? A) 1.88% B) 6.68% C) 12.15% D) 17.02%

Q: The tax burden of the firm is 0.4, the interest burden is 0.65, the return on sales is 0.05, the asset turnover is 0.90, and the leverage ratio is 1.35. What is the ROE of the firm? A) 1.58% B) 5.68% C) 12.2% D) 13.33%

Q: A firm's leverage ratio is 1.2, interest-burden ratio is 0.81, and profit margin is 0.25, and its asset turnover is 1.1. What is the firm's compound leverage factor? A) 0.243 B) 0.267 C) 0.826 D) 0.972

Q: What ratio will definitely increase when a firm increases its annual sales with no corresponding increase in assets? A) asset turnover B) current ratio C) liquidity ratio D) quick ratio

Q: The practice of "selling" large quantities of goods to customers in order to get quarterly sales up while allowing these customers to return the goods next quarter is termed ________. A) channel stuffing B) clogging the network C) spamming the johns D) artificial sales

Q: The term quality of earnings refers to ________. A) how well reported earnings conform to GAAP B) the realism and sustainability of reported earnings C) whether actual earnings matched expected earnings D) how well reported earnings fit a trend line of earnings growth

Q: The net income of the company is $120. Accounts payable increase by $20, depreciation is $15, and equipment is purchased for $40. If the firm issued $110 in new bonds, what is the total change in cash for the firm for all activities? A) increase of $225 B) increase of $130 C) decrease of $195 D) decrease of $110

Q: A firm purchases goods on credit worth $90. The same firm pays off $100 in old credit purchases. An investment is made via the purchase of a new facility, and equity is issued in the amount of $180 to pay for the purchase. What is the change in net cash provided by investments? A) $10 decrease B) $90 decrease C) $180 decrease D) $190 decrease

Q: A firm purchases goods on credit worth $100. The same firm pays off $80 in old credit purchases. An investment is made via the purchase of a new facility, and equity is issued in the amount of $200 to pay for the purchase. What is the change in net cash provided by financing? A) $20 increase B) $80 increase C) $100 increase D) $200 increase

Q: A firm purchases goods on credit worth $150. The same firm pays off $100 in old credit purchases. An investment is made via the purchase of a new facility, and equity is issued in the amount of $300 to pay for the purchase. What is the change in net cash provided by operations? A) $50 increase B) $100 increase C) $150 increase D) $250 increase

Q: The table below shows some data for Key Biscuit Company: Year Tax Burden Interest Burden ROS ATO Leverage ROE 2010 0.60 0.70 0.40 0.45 1.20 9.07% 2011 0.60 0.55 0.40 0.45 1.45 8.61% 2012 0.60 0.45 0.40 0.45 1.65 8.02% What must have caused the firm's ROE to drop? A) The firm began using more debt as a percentage of financing. B) The firm began using less debt as a percentage of financing. C) The compound leverage ratio was less than 1. D) The operating ROA was declining.

Q: Which of the following will result in an increase in cash to the firm? A) dividends paid B) a delay in collecting on accounts receivable C) net new investments D) an increase in accounts payable

Q: Which of the following transactions will result in a decrease in cash flow from investments? A) acquisition of another business B) capital gain from sale of a subsidiary C) decrease in net investments D) sale of equipment

Q: Which of the following transactions will result in a decrease in cash flow from operations? A) increase in accounts receivable B) decrease in inventories C) increase in taxes payable. D) decrease in bonds outstanding

Q: Another term for EVA is ________. A) net income B) operating income C) residual income D) market-based income

Q: The ABS company has a capital base of $100 million, an opportunity cost of capital (k) of 15%, a return on assets (ROA) of 9%, and a return on equity (ROE) of 18%. What is the economic value added (EVA) for ABS? A) $8 million B) $6 million C) $3 million D) $4 million

Q: When assessing the sustainability of a firm's cash flows, analysts will prefer to see cash growth generated from which of the following sources? A) cash flow from investment activities B) cash flow from operating activities C) cash flow from financing D) cash flow from extraordinary events

Q: Which of the following would result in a cash inflow under the heading "Cash flow from investing" in the statement of cash flows? A) purchase of capital equipment B) payments to suppliers for inventory C) collections on receivables D) sale of production machinery

Q: All of the following ratios are related to efficiency except ________. A) total asset turnover B) fixed-asset turnover C) average collection period D) cash ratio

Q: Use the following cash flow data of Haven Hardware for the year ended December 31, 2017. Cash Dividend $ 70,000 Purchase of Land $ 28,000 Cash Payment on Interest $ 20,000 Cash Payment on Salaries $ 90,000 Sales of Equipment $ 76,000 Retirement of Common Stock $ 50,000 Purchase of Equipment $ 60,000 Cash Payments to Suppliers $ 170,000 Cash Collections from Customers $ 500,000 Cash at the Beginning of the Year $ 100,000 What is the cash at the end of 2017 for Haven Hardware? A) $6,000 B) $94,000 C) $736,000 D) $188,000

Q: Use the following cash flow data of Haven Hardware for the year ended December 31, 2017. Cash Dividend $ 70,000 Purchase of Land $ 28,000 Cash Payment on Interest $ 20,000 Cash Payment on Salaries $ 90,000 Sales of Equipment $ 76,000 Retirement of Common Stock $ 50,000 Purchase of Equipment $ 60,000 Cash Payments to Suppliers $ 170,000 Cash Collections from Customers $ 500,000 Cash at the Beginning of the Year $ 100,000 What is the net increase or decrease in cash for Haven Hardware for 2017? A) −$94,000 B) −$88,000 C) $88,000 D) $188,000

Q: Use the following cash flow data of Haven Hardware for the year ended December 31, 2017. Cash Dividend $ 70,000 Purchase of Land $ 28,000 Cash Payment on Interest $ 20,000 Cash Payment on Salaries $ 90,000 Sales of Equipment $ 76,000 Retirement of Common Stock $ 50,000 Purchase of Equipment $ 60,000 Cash Payments to Suppliers $ 170,000 Cash Collections from Customers $ 500,000 Cash at the Beginning of the Year $ 100,000 What is the net cash provided by or used in financing activities of Haven Hardware? A) −$10,000 B) −$120,000 C) $10,000 D) $120,000

Q: Use the following cash flow data of Haven Hardware for the year ended December 31, 2017. Cash Dividend $ 70,000 Purchase of Land $ 28,000 Cash Payment on Interest $ 20,000 Cash Payment on Salaries $ 90,000 Sales of Equipment $ 76,000 Retirement of Common Stock $ 50,000 Purchase of Equipment $ 60,000 Cash Payments to Suppliers $ 170,000 Cash Collections from Customers $ 500,000 Cash at the Beginning of the Year $ 100,000 What is the net cash provided by or used in investing activities of Haven Hardware? A) −$12,000 B) −$62,000 C) $12,000 D) $164,000

Q: Use the following cash flow data of Haven Hardware for the year ended December 31, 2017. Cash Dividend $ 70,000 Purchase of Land $ 28,000 Cash Payment on Interest $ 20,000 Cash Payment on Salaries $ 90,000 Sales of Equipment $ 76,000 Retirement of Common Stock $ 50,000 Purchase of Equipment $ 60,000 Cash Payments to Suppliers $ 170,000 Cash Collections from Customers $ 500,000 Cash at the Beginning of the Year $ 100,000 What is the net cash provided by operating activities of Haven Hardware? A) −$30,000 B) $220,000 C) $320,000 D) $780,000

Q: A firm has an ROE equal to the industry average, but its price-to-book ratio is below the industry average. You know that the firm's ________. A) earnings yield is above the industry average B) P/E ratio is above the industry average C) dividend payout ratio is too high D) interest burden must be below the industry average

Q: A high price-to-book ratio may indicate which one of the following? A) The firm expanded its plant and equipment in the past few years. B) The firm is doing a poorer job controlling its inventory expense than other related firms. C) Investors may believe that this firm has opportunities for earning a rate of return in excess of the market capitalization rate. D) All of these options.

Q: A firm has a lower inventory turnover, a longer ACP, and a lower fixed-asset turnover than the industry averages. You should not be surprised to find that this firm has: I. Lower ATO than the industry average II. Lower ROA than the industry average III. Lower ROE than the industry average A) I only B) I and II only C) II and III only D) I, II, and III

Q: If a firm's ratio of stockholders' equity/total assets is lower than the industry average and its ratio of long-term debt/stockholders' equity is also lower than the industry average, this would suggest that the firm ________. A) has more current liabilities than the industry average B) has more leased assets than the industry average C) will be less profitable than the industry average D) has more current assets than the industry average

Q: The level of real income of a firm can be distorted by the reporting of depreciation and interest expense. During periods of low inflation, the level of reported depreciation tends to ________ income, and the level of interest expense reported tends to ________ income. A) understate; overstate B) understate; understate C) overstate; understate D) overstate; overstate

Q: A firm has a net profit/pretax profit ratio of 0.6, a leverage ratio of 1.5, a pretax profit/EBIT of 0.7, an asset turnover ratio of 4, a current ratio of 2, and a return-on-sales ratio of 6%. Its ROE is ________. A) 7.56% B) 15.12% C) 20.16% D) 30.24%

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's market-to-book value for 2017 is ________. A) 0.1708 B) 0.1529 C) 0.1462 D) 0.1636

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's P/E ratio for 2017 is ________. A) 2.8 B) 3.6 C) 6 D) 11.11

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's return-on-equity ratio for 2017 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.) A) 0.0409 B) 0.0429 C) 0.0462 D) 0.0923

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's return-on-sales ratio for 2017 is ________. A) 0.0409 B) 0.0429 C) 0.0475 D) 0.0753

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's asset turnover ratio for 2017 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.) A) 1.3 B) 1.5 C) 1.69 D) 2.83

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's fixed-asset turnover ratio for 2017 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.) A) 2.8 B) 6 C) 9 D) 11.11

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's times-interest-earned ratio for 2017 is ________. A) 2.8 B) 6 C) 9 D) 11.11

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's leverage ratio for 2017 is ________. A) 1.3 B) 1.5 C) 1.69 D) 2.83

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Burnaby Mountain Trading Company Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's quick ratio for 2017 is ________. A) 1.3 B) 1.5 C) 1.69 D) 2.83

Q: The financial statements of Burnaby Mountain Trading Company are shown below. Income Statement 2017 Sales $ 7,000,000 Cost of Goods Sold 5,000,000 Gross Profit $ 2,000,000 Selling and Administrative Expenses 1,700,000 EBIT $ 300,000 Interest Expense 50,000 Income before Tax $ 250,000 Taxes 100,000 Net Income $ 150,000 Burnaby Mountain Trading Company Comparative Balance Sheets 2017 2016 Cash $ 90,000 $ 80,000 Accounts Receivable 810,000 800,000 Inventory 800,000 720,000 Total Current Assets $ 1,700,000 $ 1,600,000 Fixed Assets 2,600,000 2,400,000 Total Assets $ 4,300,000 $ 4,000,000 Accounts Payable $ 500,000 $ 400,000 Bank Loans 100,000 100,000 Total Current Liabilities $ 600,000 $ 500,000 Long-term Bonds 400,000 300,000 Total Liabilities $ 1,000,000 $ 800,000 Common Stock (200,000 shares) 500,000 500,000 Retainded Earnings 2,800,000 2,700,000 Total Equity $ 3,300,000 $ 3,200,000 Total Liabilities and Equity $ 4,300,000 $ 4,000,000 Note: The common shares are trading in the stock market for $27 each. Refer to the financial statements of Burnaby Mountain Trading Company. The firm's current ratio for 2017 is ________. A) 1.3 B) 1.5 C) 1.69 D) 2.83

Q: The financial statements of Flathead Lake Manufacturing Company are shown below. Income Statement 2017 Sales $ 9,300,000 Cost of Goods Sold 5,750,000 Depreciation Expense 550,000 Gross Profit $ 3,000,000 Selling and Administrative Expenses 2,200,000 EBIT $ 800,000 Interest Expense 200,000 Income before Tax $ 600,000 Taxes 375,000 Net Income $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $ 1,150,000 $ 1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $ 3,200,000 $ 2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $ 2,300,000 $ 1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $ 3,200,000 $ 2,500,000 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 P/E ratio for 2017 is ________. A) 3.39 B) 3.6 C) 13.33 D) 10.67

Q: The financial statements of Flathead Lake Manufacturing Company are shown below. Income Statement 2017 Sales $ 9,300,000 Cost of Goods Sold 5,750,000 Depreciation Expense 550,000 Gross Profit $ 3,000,000 Selling and Administrative Expenses 2,200,000 EBIT $ 800,000 Interest Expense 200,000 Income before Tax $ 600,000 Taxes 375,000 Net Income $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $ 1,150,000 $ 1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $ 3,200,000 $ 2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $ 2,300,000 $ 1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $ 3,200,000 $ 2,500,000 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 return on equity ratio for 2017 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.) A) 6.5% B) 26.5% C) 33.4% D) 38%

Q: The financial statements of Flathead Lake Manufacturing Company are shown below. Income Statement 2017 Sales $ 9,300,000 Cost of Goods Sold 5,750,000 Depreciation Expense 550,000 Gross Profit $ 3,000,000 Selling and Administrative Expenses 2,200,000 EBIT $ 800,000 Interest Expense 200,000 Income before Tax $ 600,000 Taxes 375,000 Net Income $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $ 1,150,000 $ 1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $ 3,200,000 $ 2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $ 2,300,000 $ 1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $ 3,200,000 $ 2,500,000 Note: The common shares are trading in the stock market for $15 per share. Refer to the financial statements of Flathead Lake Manufacturing Company. In 2017 Flathead generated ________ of EBIT for every dollar of sales. A) $0.075 B) $0.086 C) $0.092 D) $0.099

Q: The financial statements of Flathead Lake Manufacturing Company are shown below. Income Statement 2017 Sales $ 9,300,000 Cost of Goods Sold 5,750,000 Depreciation Expense 550,000 Gross Profit $ 3,000,000 Selling and Administrative Expenses 2,200,000 EBIT $ 800,000 Interest Expense 200,000 Income before Tax $ 600,000 Taxes 375,000 Net Income $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $ 1,150,000 $ 1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $ 3,200,000 $ 2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $ 2,300,000 $ 1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $ 3,200,000 $ 2,500,000 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 total asset turnover for 2017 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.) A) 3.56 B) 3.26 C) 3.14 D) 3.02

Q: The financial statements of Flathead Lake Manufacturing Company are shown below. Income Statement 2017 Sales $ 9,300,000 Cost of Goods Sold 5,750,000 Depreciation Expense 550,000 Gross Profit $ 3,000,000 Selling and Administrative Expenses 2,200,000 EBIT $ 800,000 Interest Expense 200,000 Income before Tax $ 600,000 Taxes 375,000 Net Income $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $ 1,150,000 $ 1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $ 3,200,000 $ 2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $ 2,300,000 $ 1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $ 3,200,000 $ 2,500,000 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 industry average ACP is 32 days. How is Flathead doing in its collections relative to the industry? (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.) A) Flathead's receivables are outstanding about 9 fewer days than the industry average. B) Flathead's receivables are outstanding about 15 fewer days than the industry average. C) Flathead's receivables are outstanding about 12 more days than the industry average. D) Flathead's receivables are outstanding about 6 more days than the industry average.

Q: The financial statements of Flathead Lake Manufacturing Company are shown below. Income Statement 2017 Sales $ 9,300,000 Cost of Goods Sold 5,750,000 Depreciation Expense 550,000 Gross Profit $ 3,000,000 Selling and Administrative Expenses 2,200,000 EBIT $ 800,000 Interest Expense 200,000 Income before Tax $ 600,000 Taxes 375,000 Net Income $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $ 1,150,000 $ 1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $ 3,200,000 $ 2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $ 2,300,000 $ 1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $ 3,200,000 $ 2,500,000 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 cash flow from operating activities for 2017 was ________. A) $810,000 B) $775,000 C) $755,000 D) $735,000

Q: The financial statements of Flathead Lake Manufacturing Company are shown below. Income Statement 2017 Sales $ 9,300,000 Cost of Goods Sold 5,750,000 Depreciation Expense 550,000 Gross Profit $ 3,000,000 Selling and Administrative Expenses 2,200,000 EBIT $ 800,000 Interest Expense 200,000 Income before Tax $ 600,000 Taxes 375,000 Net Income $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $ 1,150,000 $ 1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $ 3,200,000 $ 2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $ 2,300,000 $ 1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $ 3,200,000 $ 2,500,000 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 2017 is ________. A) 2.13 B) 2.44 C) 2.56 D) 2.89

Q: The financial statements of Flathead Lake Manufacturing Company are shown below. Income Statement 2017 Sales $ 9,300,000 Cost of Goods Sold 5,750,000 Depreciation Expense 550,000 Gross Profit $ 3,000,000 Selling and Administrative Expenses 2,200,000 EBIT $ 800,000 Interest Expense 200,000 Income before Tax $ 600,000 Taxes 375,000 Net Income $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $ 1,150,000 $ 1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $ 3,200,000 $ 2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $ 2,300,000 $ 1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $ 3,200,000 $ 2,500,000 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 2017 indicates that Flathead's liquidity has ________ since 2016. A) risen B) fallen C) stayed the same D) The answer cannot be determined from the information given.

Q: Which of the following statements is true concerning economic value added? A) A growing number of firms tie managers' compensation to EVA. B) A profitable firm will always have a positive EVA. C) EVA recognizes that the cost of capital is not a real cost. D) If a firm has positive present value of growth opportunities, it will have positive EVA.

Q: Economic value added (EVA) is A) the difference between the return on assets and the opportunity cost of capital times the capital base. B) ROA ROE. C) a measure of the firm's abnormal return. D) largest for high-growth firms.

Q: A firm has a tax burden of 0.7, a leverage ratio of 1.3, an interest burden of 0.8, 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? A) 12.4% B) 14.5% C) 16.6% D) 17.8%

Q: A firm has an ROA of 8% and a debt/equity ratio of 0.5; its ROE is ________. A) 4% B) 6% C) 8% D) 12%

Q: A firm has a P/E ratio of 24 and an ROE of 12%. Its market-to-book-value ratio is ________. A) 2.88 B) 2 C) 1.75 D) 0.69

Q: You find that a firm that uses debt has a compound leverage factor less than 1. This tells you that ________. A) the firm's use of financial leverage is positively contributing to ROE B) the firm's use of financial leverage is negatively contributing to ROE C) the firm's use of operating leverage is positively contributing to ROE D) the firm's use of operating leverage is negatively contributing to ROE

Q: 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 ________. A) greater than zero, but it is impossible to determine how operating ROA will compare to ROE B) equal to ROE C) greater than ROE D) less than ROE