Question 1

The ability of a firm to meet its short-term debt obligations as they come due is indicated by which of the following ratios:

Accepted Answer

A)  liquidity ratios
B)  asset utilization ratios
C)  financial leverage ratios
D)  profitability ratios

Question 2

Ratios used to compare different firms at the same point in time belong to a category of analysis called:

Accepted Answer

A)  time series analysis
B)  cross-sectional analysis
C)  industry comparative analysis
D)  just-in-time analysis

Question 3

Break-even analysis is used to estimate how many units of products must be sold in order for the firm to have a reasonable profit.

Accepted Answer

A) True 
 B)False

Question 4

In cost-volume-profit analysis,a firm "breaks even" when its total revenues:

Accepted Answer

A)  equal variable costs
B)  equal total costs
C)  equal fixed costs
D)  are less than the sum of variable and fixed costs

Question 5

Budgets are written financial plans utilized in sales forecasts.

Accepted Answer

A) True 
 B)False

Question 6

The total asset turnover is computed as net sales divided by total assets.

Accepted Answer

A) True 
 B)False

Question 7

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information,the breakeven sales level in units is

Accepted Answer

A)  7,500
B)  15,030
C)  5,003
D)  none of the above

Question 8

Which of the following would not be considered in the fixed charge coverage ratio?

Accepted Answer

A)  sinking fund payments
B)  dividend payments
C)  lease payments
D)  all the above are considered in the fixed charge coverage ratio

Question 9

A cross-sectional analysis would be used to evaluate a firm's performance over time.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is most correct?

Accepted Answer

A)  higher levels of fixed costs result in lower levels of operating leverage.
B)  higher variable costs result in larger contribution margin.
C)  higher fixed costs result in larger break-even quantity.
D)  each of the above statements is false.

Question 11

Which of the following might be a source of industry information?

Accepted Answer

A)  Dun and Bradstreet
B)  Risk Management Association
C)  the Federal Trade Commission
D)  none of the above

Question 12

Financial analysis using ratios can assist managers in the firm's financial planning process.

Accepted Answer

A) True 
 B)False

Question 13

Liquidity ratios indicate the ability to meet short-term obligations to creditors as they mature or come due.

Accepted Answer

A) True 
 B)False

Question 14

Which group of ratios might be most interesting to potential creditors of a firm?

Accepted Answer

A)  asset utilization ratios
B)  profitability ratios
C)  leverage ratios
D)  market value ratios

Question 15

What would be the return on total assets of a firm if net income is $50,000,total sales are $100,000,and total assets are $175,000?

Accepted Answer

A)  35%
B)  28.6%
C)  57.14%
D)  not enough information available

Question 16

Rental or lease payments are included in which one of the following ratios?

Accepted Answer

A)  interest coverage
B)  times-interest-earned
C)  fixed charge coverage
D)  equity multiplier

Question 17

A firm has fixed operating costs of $150,000,total sales of $1,500,000,and total variable costs of $1,275,000.The firm's operating breakeven point in dollars is

Accepted Answer

A)  $150,000
B)  $176,471
C)  $1,000,000
D)  $1,425,000

Question 18

All other things being equal,a decrease in the contribution margin for a firm would:

Accepted Answer

A)  increase the break-even point
B)  decrease the break-even point
C)  have no impact on the break-even point
D)  not enough information given

Question 19

If a firm has no debt and pays no taxes,then the firm's operating profit margin will be ___________ the firm's net profit margin.

Accepted Answer

A)  greater than
B)  less than
C)  the same as
D)  we can't tell

Question 20

Profitability ratios indicate the extent to which assets are used to support sales.

Accepted Answer

A) True 
 B)False

Exam 14: Financial Analysis and Long-Term Financial Planning

A firm has fixed operating costs of $150,000,total sales of $1,500,000,and total variable costs of $1,275,000.The firm's operating breakeven point in dollars is

Correct AnswerverifiedShow Answer

The ability of a firm to meet its short-term debt obligations as they come due is indicated by which of the following ratios:

Correct AnswerverifiedShow Answer

In cost-volume-profit analysis,a firm "breaks even" when its total revenues:

Correct AnswerverifiedShow Answer

Ratios used to compare different firms at the same point in time belong to a category of analysis called:

Correct AnswerverifiedShow Answer

All other things being equal,a decrease in the contribution margin for a firm would:

Correct AnswerverifiedShow Answer

Break-even analysis is used to estimate how many units of products must be sold in order for the firm to have a reasonable profit.

Correct AnswerverifiedShow Answer

If a firm has no debt and pays no taxes,then the firm's operating profit margin will be ___________ the firm's net profit margin.

Correct AnswerverifiedShow Answer

Profitability ratios indicate the extent to which assets are used to support sales.

Correct AnswerverifiedShow Answer

Which of the following would not be considered in the fixed charge coverage ratio?

Correct AnswerverifiedShow Answer

Which of the following statements is most correct?

Correct AnswerverifiedShow Answer

What would be the return on total assets of a firm if net income is $50,000,total sales are $100,000,and total assets are $175,000?

Correct AnswerverifiedShow Answer

Sacramento Sandals (SS) has fixed annual operating costs of $75,000.SS retails each pair of sandals for $14.99 each and the variable cost per pair is $4.99.Based on this information,the breakeven sales level in units is

Correct AnswerverifiedShow Answer

Budgets are written financial plans utilized in sales forecasts.

Correct AnswerverifiedShow Answer

The total asset turnover is computed as net sales divided by total assets.

Correct AnswerverifiedShow Answer

A cross-sectional analysis would be used to evaluate a firm's performance over time.

Correct AnswerverifiedShow Answer

Rental or lease payments are included in which one of the following ratios?

Correct AnswerverifiedShow Answer

Liquidity ratios indicate the ability to meet short-term obligations to creditors as they mature or come due.

Correct AnswerverifiedShow Answer

Financial analysis using ratios can assist managers in the firm's financial planning process.

Correct AnswerverifiedShow Answer

Which group of ratios might be most interesting to potential creditors of a firm?

Correct AnswerverifiedShow Answer

Which of the following might be a source of industry information?

Correct AnswerverifiedShow Answer

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