Scribd
Upload
14 views

2a. Question - Chapter 2

The document discusses financial analysis concepts across multiple choice and short answer questions. It covers topics such as net working capital, various ratios including times interest earned, debt-equity, and cash coverage. Numerical questions calculate amounts such as taxable income, net income, and cash flows.

Uploaded by

plinhcoco02
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
14 views

2a. Question - Chapter 2

The document discusses financial analysis concepts across multiple choice and short answer questions. It covers topics such as net working capital, various ratios including times interest earned, debt-equity, and cash coverage. Numerical questions calculate amounts such as taxable income, net income, and cash flows.

Uploaded by

plinhcoco02
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

CORPORATE FINANCE 2

CHAPTER 2 – FINANCIAL ANALYSIS

I/ MULTIPLE CHOICE

1. Which one of the following will increase the value of a firm's net working capital?

A. depreciating an asset

B. collecting an accounts receivable

C. purchasing inventory on credit

D. selling inventory at a profit

2. Which one of the following statements concerning net working capital is correct?

A. The lower the value of net working capital the greater the ability of a firm to meet its
current obligations.

B. An increase in net working capital must also increase current assets.

C. Net working capital increases when inventory is sold for cash at a profit.

D. Firms with equal amounts of net working capital are also equally liquid.

3. What is the taxable income for 2011?

A. $1,051.00

B. $1,367.78

C. $1,592.42

D. $2,776.41

4. Which one of the following statements is correct?

A. Long-term creditors would prefer the times interest earned ratio be 1.4 rather than 1.5.
B. The debt-equity ratio can be computed as 1 plus the equity multiplier.

C. An equity multiplier of 1.2 means a firm has $1.20 in sales for every $1 in equity.

D. An increase in the depreciation expense will not affect the cash coverage ratio.

5. If a firm produces a twelve percent return on assets and also a twelve percent return
on equity, then the firm:

A. is using its assets as efficiently as possible.

B. has no net working capital.

C. has a debt-equity ratio of 1.0.

D. has an equity multiplier of 1.0.

6. A firm has a debt-equity ratio of 57 percent, a total asset turnover of 1.12, and a
profit margin of 4.9 percent. The total equity is $511,640. What is the amount of the
net income?

A. $28,079

B. $35,143

C. $44,084

D. $47,601

7. Jasper United had sales of $21,000 in 2011 and $24,000 in 2012. The firm's current
accounts remained constant. Given this information, which one of the following
statements must be true?

A. The days' sales in receivables increased.

B. The net working capital turnover rate increased.

C. The fixed asset turnover decreased.

D. The receivables turnover rate decreased.


II/ SHORT ANSWER

1. During 2011, RIT Corp. had sales of $565,600. Costs of goods sold, administrative and
selling expenses, and depreciation expenses were $476,000, $58,800, and $58,800,
respectively. In addition, the company had an interest expense of $112,000 and a tax rate of
32 percent. What is the operating cash flow for 2009? Ignore any tax loss carry-back or carry-
forward provisions.

2. The Lakeside Inn had operating cash flow of $48,450. Depreciation was $6,700 and
interest paid was $2,480. A net total of $2,620 was paid on long-term debt. The firm spent
$24,000 on fixed assets and decreased net working capital by $1,330. What is the amount of
the cash flow to stockholders?

3.

What is the cash flow from assets for 2011?


4. Lassiter Industries has annual sales of $220,000 with 10,000 shares of stock outstanding.
The firm has a profit margin of 6 percent and a price-sales ratio of 1.20. What is the firm's
price-earnings ratio?

5. Billings, Inc. has net income of $161,000, a profit margin of 7.6 percent, and an accounts
receivable balance of $127,100. Assume that 66 percent of sales are on credit. What is the
days' sales in receivables?

6. The Dockside Inn has net income for the most recent year of $8,450. The tax rate was 35
percent. The firm paid $1,300 in total interest expense and deducted $1,900 in depreciation
expense. What was the cash coverage ratio for the year?

7. What value can the price-sales ratio provide to financial managers that the price-earnings
ratio cannot?

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy