Finc 331 Quiz 2
Question 1 (1 point)
Which of the following is a correct statement regarding a method of drafting a company's income
statement?
Question 1 options:
All of these answers.
The non-operating section of the multi-step method covers all non-primary revenues and
losses.
The single-step method requires totaling a company's revenue, then subtracting all of its
costs.
The multi-step method requires calculating the gross profit then subtracting operating
expenses.
Question 2 (1 point)
Which of the following is NOT a correct definition of a basic type of financial ratios?
Question 2 options:
Liquidity ratios measure the availability of cash to pay debt.
Activity ratios are concerned with shareholder audiences.
Debt ratios measure the firm's ability to pay long-term debt.
Profitability ratios measure the firm's use of its assets to generate an acceptable rate of
return.
Question 3 (1 point)
During a fiscal year, a company has $20,000,000 in revenue. Its operating expenses are
$17,000,000. What is the company's operating margin?
Question 3 options:
.73
0.85
0.15
.13
Question 4 (1 point)
During a fiscal year, a company had $25,000,000 in total sales. It had a cost of goods sold
(COGS) of $18,000,000 and $4,000,000 in additional expenses. What is the company's gross
profit margin?
Question 4 options:
33.33%
12%
16%
28%
Question 5 (1 point)
A company had $5,000,000 in total revenues for its fiscal year. Its expenses for the year were
$3,500,000. Its total assets were $12,500,000. What is the company's return on assets for the
fiscal year?
Question 5 options:
.40
0.12
.70
.28
Question 6 (1 point)
A company has assets of $2,000,000, net sales of $3,000,000, and $1,500,000 in equity. Its net
income is $10,000,000. What is its return on equity?
Question 6 options:
5
3.333
15
6.667
Question 7 (1 point)
A business begins its fiscal year with an inventory balance of $1,000,000. During that year its
cost of goods sold is $3,500,000. Its inventory balance at the end of the year is $500,000. What is
its inventory turnover for the year?
Question 7 options:
78.16
.12
.21
4.67
Question 8 (1 point)
A business has $1,250,000 in accounts receivable. Its annual sales for the fiscal year is
$30,000,000. What is its days sales outstanding ratio?
Question 8 options:
0.041
8760
24
15.208
Question 9 (1 point)
At the beginning of a fiscal year, a company has $1,000,000 in fixed assets. During that year, it
makes $8,000,000 in net sales. At the end of the fiscal year it has $1,500,000 in fixed assets.
What is its fixed-asset turnover ratio?:
Question 9 options:
8
6.4
5.333
.15625
Question 10 (1 point)
A company has $100,00 in cash, $300,000 in accounts receivable, $50,000 in inventory and a
$300,000 office building. Its current liabilities are $250,000. What is the company's current ratio,
and does that ratio good short-term financial strength?
Question 10 options:
The current ratio is 1.8, and the ratio indicates poor short-term financial strength.
The current ratio is 3, and the ratio indicates good short-term financial strength.
The current ratio is 1.8, and the ratio indicates good short-term financial strength.
The current ratio is 3, and the ratio indicates poor short-term financial strength.
Question 11 (1 point)
Which of the following statements about the total debt to total assets ratio is NOT true?
Question 11 options:
The debt ratio is calculated by dividing a company's total liability by its total assets.
If a company's debt to asset ratio is less than 0.5, most of its assets are financed through
debt.
The higher the total debt to total asset ratio, the greater the financial risk.
A highly leveraged company could be in danger if its creditors demand repayment.
Question 12 (1 point)
Suppose that a public corporation has $100 million net income. If its P/E ratio is 3.5 and it has 1
million shares outstanding, what is the value of stock price?
Question 12 options:
100
35
350
10
Question 13 (1 point)
Suppose that a public corporation has a total market value (according to its stock price and
number of shares outstanding) of $500 million. If its current net income is $10 per share and it
has 1 million shares outstanding, what is the value of its P/E ratio?
Question 13 options:
50
100
10
500
Question 14 (1 point)
A company has $1 million in sales last year, $1.5 million in sales this year, and projected net
income of $250,000. It has $5 million of its assets tied to sales, $3 million in sale affected
liabilities, and a retention ratio of 0.3. What is its AFN?
Question 14 options:
$925,000
$9,992,500
$23,425,000
$9,925,000
Question 15 (1 point)
Which of the following is the correct order of steps when performing a forecast related to a
company's performance?
Question 15 options:
Perform sales forecast, multiply by unit price, assess market price, assess cost, determine
profit.
Determine profit, assess market price, assess cost, perform sales forecast, and multiply by
unit price.
Perform sales forecast, assess market price, assess cost, multiply by unit price, determine
profit.
Assess market price, assess cost, perform sales forecast, multiply by unit price, determine
profit.
Question 16 (1 point)
Which of the following statements correctly defines a component of Cost of Goods Sold?
Question 16 options:
Labor costs are the wages paid to employees who spend their time working directly on the
product.
All overhead costs are associated with production activities.
All of these answers.
Parts, Raw Materials, and supplies used are all physical objects that go into making a good.
Question 17 (1 point)
A company wants to have $5 million in sales with $1 million in profit. It will have fixed costs of
$3 million. Each unit of its product sells for $20. How much contribution per unit must the
company have to meet its goals?
Question 17 options:
$0.79
$8
$1.60
$16
Question 18 (1 point)
A company is considering merging with another business. It is planning on preparing a pro forma
income statement. Which of the following should be included in the pro forma statement?
Question 18 options:
How much the merged company's income tax expense will increase
All of these answers.
How much the company's revenues will increase due to the merger.
If the merged company will have increased Research & Development (R&D) expenses.
Question 19 (1 point)
Which of the following statements regarding pro forma financial statements is correct?
Question 19 options:
Pro forma statements are used quarterly to project future financial activity.
Pro form statements summarize the projected future status of a company based on current
statements.
Pro forma balance sheets should focus on assets only.
All of these answers.
Question 20 (1 point)
A company wants to increase the amount of time in its disbursement cycle. Which of the
following is a valid way to do that?
Question 20 options:
All of these answers.
Mail payment to suppliers for contractual obligations.
Pay for purchases using checks.
Use credit cards as often as possible.
Purchase answer to see full
attachment