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Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ ​ ​ -Refer to Exhibit 4.1.What is the firm's dividends per share? Do not round your intermediate calculations. A) $1.63 B) $1.78 C) $2.20 D) $1.94 E) $2.04 ​ ​ -Refer to Exhibit 4.1.What is the firm's dividends per share? Do not round your intermediate calculations.


A) $1.63
B) $1.78
C) $2.20
D) $1.94
E) $2.04

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Safeco's current assets total to $20 million versus $10 million of current liabilities,while Risco's current assets are $10 million versus $20 million of current liabilities.Both firms would like to "window dress" their end-of-year financial statements,and to do so they tentatively plan to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts.Which of the statements below best describes the results of these transactions?


A) The transactions would improve Safeco's financial strength as measured by its current ratio but lower Risco's current ratio.
B) The transactions would lower Safeco's financial strength as measured by its current ratio but raise Risco's current ratio.
C) The transactions would have no effect on the firms' financial strength as measured by their current ratios.
D) The transactions would lower both firms' financial strength as measured by their current ratios.
E) The transactions would improve both firms' financial strength as measured by their current ratios.

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Which of the following statements is CORRECT?


A) The ratio of long-term debt to total capital is more likely to experience seasonal fluctuations than is either the DSO or the inventory turnover ratio.
B) If two firms have the same ROA,the firm with the most debt can be expected to have the lower ROE.
C) An increase in the DSO,other things held constant,could be expected to increase the total assets turnover ratio.
D) An increase in the DSO,other things held constant,could be expected to increase the ROE.
E) An increase in a firm's total debt to total capital ratio,with no changes in its sales or operating costs,could be expected to lower its profit margin.

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A firm's new president wants to strengthen the company's financial position.Which of the following actions would make the company financially stronger?


A) Increase accounts receivable while holding sales constant.
B) Increase EBIT while holding sales and assets constant.
C) Increase accounts payable while holding sales constant.
D) Increase notes payable while holding sales constant.
E) Increase inventories while holding sales constant.

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Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ ​ ​ -Refer to Exhibit 4.1.What is the firm's market-to-book ratio? Do not round your intermediate calculations. A) 1.82 B) 1.55 C) 1.72 D) 1.42 E) 1.89 ​ ​ -Refer to Exhibit 4.1.What is the firm's market-to-book ratio? Do not round your intermediate calculations.


A) 1.82
B) 1.55
C) 1.72
D) 1.42
E) 1.89

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Which of the following would generally indicate an improvement in a company's financial position,holding other things constant?


A) The TIE declines.
B) The DSO increases.
C) The quick ratio increases.
D) The current ratio declines.
E) The total assets turnover decreases.

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Companies HD and LD are both profitable,and they have the same total assets (TA) ,total invested capital,sales (S) ,return on assets (ROA) ,and profit margin (PM) .Both firms finance using only debt and common equity.However,Company HD has the higher total debt to total capital ratio.Which of the following statements is CORRECT?


A) Company HD has a lower total assets turnover than Company LD.
B) Company HD has a lower equity multiplier than Company LD.
C) Company HD has a higher fixed assets turnover than Company LD.
D) Company HD has a higher ROE than Company LD.
E) Company HD has a lower operating income (EBIT) than Company LD.

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Which of the following statements is CORRECT?


A) A decline in a firm's inventory turnover ratio suggests that it is improving both its inventory management and its liquidity position,i.e. ,that it is becoming more liquid.
B) In general,it's better to have a low inventory turnover ratio than a high one,as a low one indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock.
C) If a firm's fixed assets turnover ratio is significantly lower than the average for its industry,then it could be that the firm uses its fixed assets very efficiently or is operating at over capacity and should probably add fixed assets.
D) The more conservative a firm's management is,the higher the firm's total debt to total capital ratio is likely to be.
E) The days sales outstanding ratio tells us how long it takes,on average,to collect after a sale is made.The DSO can be compared with the firm's credit terms to get an idea of whether customers are paying on time.

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Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ ​ ​ -Refer to Exhibit 4.1.What is the firm's equity multiplier? Do not round your intermediate calculations. A) 4.35 B) 3.91 C) 5.43 D) 5.09 E) 4.87 ​ ​ -Refer to Exhibit 4.1.What is the firm's equity multiplier? Do not round your intermediate calculations.


A) 4.35
B) 3.91
C) 5.43
D) 5.09
E) 4.87

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High current and quick ratios always indicate that the firm is managing its liquidity position well.

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Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ ​ ​ -Refer to Exhibit 4.1.What is the firm's quick ratio? Do not round your intermediate calculations. A) 0.38 B) 0.51 C) 0.47 D) 0.48 E) 0.46 ​ ​ -Refer to Exhibit 4.1.What is the firm's quick ratio? Do not round your intermediate calculations.


A) 0.38
B) 0.51
C) 0.47
D) 0.48
E) 0.46

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Suppose all firms follow similar financing policies,face similar risks,have equal access to capital,and operate in competitive product and capital markets.However,firms face different operating conditions because,for example,the grocery store industry is different from the airline industry.Under these conditions,firms with high profit margins will tend to have high asset turnover ratios,and firms with low profit margins will tend to have low turnover ratios.

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Walter Industries' current ratio is 0.5.Considered alone,which of the following actions would increase the company's current ratio?


A) Borrow using short-term notes payable and use the cash to increase inventories.
B) Use cash to reduce accruals.
C) Use cash to reduce accounts payable.
D) Use cash to reduce short-term notes payable.
E) Use cash to reduce long-term bonds outstanding.

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Helmuth Inc's latest net income was $1,075,000,and it had 225,000 shares outstanding.The company wants to pay out 45% of its income.What dividend per share should it declare? Do not round your intermediate calculations.


A) $1.85
B) $1.66
C) $1.72
D) $1.81
E) $2.15

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Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc.Note that the firm has no amortization charges,it does not lease any assets,none of its debt must be retired during the next 5 years,and the notes payable will be rolled over. ​ ​ ​ -Refer to Exhibit 4.1.What is the firm's operating margin? Do not round your intermediate calculations. A) 4.65% B) 3.90% C) 5.60% D) 3.80% E) 5.00% ​ ​ -Refer to Exhibit 4.1.What is the firm's operating margin? Do not round your intermediate calculations.


A) 4.65%
B) 3.90%
C) 5.60%
D) 3.80%
E) 5.00%

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Which of the following statements is CORRECT?


A) If a security analyst saw that a firm's days' sales outstanding (DSO) was higher than the industry average and trending still higher,this would be interpreted as a sign of strength.
B) A high average DSO indicates that none of the firm's customers are paying on time.In addition,it makes no sense to evaluate the firm's DSO with the firm's credit terms.
C) There is no relationship between the days' sales outstanding (DSO) and the average collection period (ACP) .These ratios measure entirely different things.
D) A reduction in accounts receivable would have no effect on the current ratio,but it would lead to an increase in the quick ratio.
E) If a firm increases its sales while holding its accounts receivable constant,then its days' sales outstanding will decline,other things held constant.

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The more conservative a firm's management is,the higher the firm's total debt to total capital ratio [measured as (Short-term debt + Long-term debt)/(Debt + Preferred stock + Common equity)] is likely to be.

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Ratio analysis involves analyzing financial statements to help appraise a firm's financial position and strength.

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If a bank loan officer were considering a company's loan request,which of the following statements would be CORRECT,other things held constant?


A) The lower the company's inventory turnover ratio,the lower the interest rate the bank should charge.
B) The higher the days sales outstanding ratio,the lower the interest rate the bank should charge.
C) The lower the total debt to total capital ratio,the lower the interest rate the bank should charge.
D) The lower the company's TIE ratio,the lower the interest rate the bank should charge.
E) The lower the current ratio,the lower the interest rate the bank should charge.

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The inventory turnover and current ratio are related.The combination of a high current ratio and a low inventory turnover ratio,relative to industry norms,suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

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