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A142 Tutorial Topic 3 08.12.2020

The document contains a tutorial on assessing a firm's financial performance through various financial metrics and ratios. It includes 20 multiple choice questions testing understanding of key financial statements like the income statement, balance sheet, and statement of cash flows. It also covers calculation and interpretation of important ratios like liquidity, profitability, asset utilization, and debt management ratios. The questions require understanding accounting concepts like common-sizing, calculation of return on equity and debt ratios, and interpretation of ratios like price-earnings and market-to-book.

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202 views

A142 Tutorial Topic 3 08.12.2020

The document contains a tutorial on assessing a firm's financial performance through various financial metrics and ratios. It includes 20 multiple choice questions testing understanding of key financial statements like the income statement, balance sheet, and statement of cash flows. It also covers calculation and interpretation of important ratios like liquidity, profitability, asset utilization, and debt management ratios. The questions require understanding accounting concepts like common-sizing, calculation of return on equity and debt ratios, and interpretation of ratios like price-earnings and market-to-book.

Uploaded by

nat
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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TUTORIAL TOPIC 3: ASSESSING FIRM’S FINANCIAL PERFORMANCE

Name:NUR AZWIN NATASHA BINTI A.ZUHARI Metric No: 4201003161

1. The sources and uses of cash over a stated period of time are reflected on the:
A. income statement.
B. balance sheet.
C. tax reconciliation statement.
D. statement of cash flows.
E. statement of operating position.

2. Which one of the following accurately describes the three parts of the Du Pont identity?
A. operating efficiency, equity multiplier, and profitability ratio
B. financial leverage, operating efficiency, and profitability ratio
C. equity multiplier, profit margin, and total asset turnover
D. debt-equity ratio, capital intensity ratio, and profit margin

3. A common-size income statement is an accounting statement that expresses all of a firm's


expenses as percentage of:
A. total assets.
B. total equity.
C. net income.
D. taxable income.
E. sales.

4. Which one of the following standardizes items on the income statement and balance sheet
relative to their values as of a common point in time?
A. statement of standardization
B. statement of cash flows
C. common-base year statement
D. common-size statement
E. base reconciliation statement

5. Which of the following ratios are measures of a firm's liquidity?


I. quick ratio
II. interval measure
III. debt-equity ratio
IV. cash coverage ratio

A. I and II only
B. II and IV only
C. I, III, and IV only
D. I, II, and III only
TUTORIAL TOPIC 3: ASSESSING FIRM’S FINANCIAL PERFORMANCE

Name:NUR AZWIN NATASHA BINTI A.ZUHARI Metric No: 4201003161


6. Which one of the following statements is TRUE?
A. The debt-equity ratio can be computed as 1 plus the equity multiplier.
B. An increase in the depreciation expense will not affect the cash coverage ratio.
C. If total debt ratio is greater than 0.50, then debt-equity ratio must be less than 1.0.
D. An equity multiplier of 1.2 means a firm has RM1.20 in sales for every RM1 in equity.

7. Turbo-Mech Bhd has current liabilities of RM350,000, a quick ratio of 1.65, inventory
turnover of 3.2, and a current ratio of 2.9. What is the Cost Of Goods Sold (COGS)?
A. RM980,000
B. RM1,060,000
C. RM1,200,000
D. RM1,400,000

8. The Bike Shop paid RM2,510 in interest and RM1,850 in dividends last year. The times
interest earned ratio is 2.5 and the depreciation expense is RM560. What is the value of the cash
coverage ratio?
A. 1.67 times
B. 1.80 times
C. 2.21 times
D. 2.72 times

9. Canine Supply has sales of RM2,200, total assets of RM1,400, and a debt-equity ratio of 0.3.
Its return on equity is 15 percent. What is the net income?
A. RM138.16
B. RM141.41
C. RM152.09
D. RM161.54

10. Firm has 180,000 shares of stock outstanding, sales of RM1.94 million, net income of
RM156,400, a price-earnings ratio of 15.7, and a book value per share of RM8.12. What is the
market-to-book ratio?
A. 1.68
B. 1.84
C. 2.23
D. 2.45
TUTORIAL TOPIC 3: ASSESSING FIRM’S FINANCIAL PERFORMANCE

Name:NUR AZWIN NATASHA BINTI A.ZUHARI Metric No: 4201003161

11. On the Statement of Cash Flows, which of the following are considered financing activities?
I. increase in long-term debt
II. decrease in accounts payable
III. interest paid
IV. dividends paid
A. I and IV only
B. III and IV only
C. II and III only
D. I, III, and IV only
E. I, II, III, and IV

12. A firm uses 2012 as the base year for its financial statements. The common-size, base-year
statement for 2012 has an inventory value of 1.08. This is interpreted to mean that the 2009
inventory is equal to 108 percent of which one of the following?
A. 2011 inventory
B. 2011 total assets
C. 2012 total assets
D. 2011 inventory expressed as a percent of 2011 total assets
E. 2012 inventory expressed as a percent of 2012 total assets

13. Ratios that measure how efficiently a firm manages its assets and operations to generate net
income are referred to as _____ ratios.
A. asset management
B. long-term solvency
C. short-term solvency
D. profitability
E. turnover

14. 48. Wise's Corner Grocer had the following current account values. What effect did the
change in net working capital have on the firm's cash flows for 2012?
2011 2012
Cash $87 $112
Accounts receivable $309 $321
Inventory $919 $868
Accounts payable $617 $714

A. net use of cash of $37


B. net use of cash of $83
C. net source of cash of $83
D. net source of cash of $111
E. net source of cash of $135
TUTORIAL TOPIC 3: ASSESSING FIRM’S FINANCIAL PERFORMANCE

Name:NUR AZWIN NATASHA BINTI A.ZUHARI Metric No: 4201003161


15. A firm has sales of $2,190, net income of $174, net fixed assets of $1,600, and current assets
of $720. The firm has $310 in inventory. What is the common-size statement value of inventory?

A. 13.36 percent
B. 14.16 percent
C. 19.38 percent
D. 30.42 percent
E. 43.06 percent

16. Russell's Deli has cash of $136, accounts receivable of $87, accounts payable of $215, and
inventory of $409. What is the value of the quick ratio?

A. 0.31
B. 0.53
C. 0.71
D. 1.04
E. 1.07

17. Uptown Men's Wear has accounts payable of $2,214, inventory of $7,950, cash of $1,263,
fixed assets of $8,400, accounts receivable of $3,907, and long-term debt of $4,200. What is the
value of the net working capital to total assets ratio?

A. 0.31
B. 0.42
C. 0.47
D. 0.51
E. 0.56

18. A firm has 160,000 shares of stock outstanding, sales of $1.94 million, net income of
$126,400, a price-earnings ratio of 18.7, and a book value per share of $9.12. What is the
market-to-book ratio?

A. 1.62
B. 1.84
C. 2.23
D. 2.45
E. 2.57
TUTORIAL TOPIC 3: ASSESSING FIRM’S FINANCIAL PERFORMANCE

Name:NUR AZWIN NATASHA BINTI A.ZUHARI Metric No: 4201003161


19. Big Guy Subs has net income of $150,980, a price-earnings ratio of 12.8, and earnings per
share of $0.87. How many shares of stock are outstanding?

A. 13,558
B. 14,407
C. 165,523
D. 171,000
E. 173,540

20. Y3K, Inc., has sales of $5,276, total assets of $3,105, and a debt-equity ratio of 1.40. if its
return on equity is 15 percent, what is its net income?

A. 194.06
B. 182.09
C. 160.09
D. 190.0

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