Principles of Finance Unit 3 Quiz unit 3 quiz

Which answer is the correct definition of the accounting equation? Assets = Liabilities + Owner’s Equity
Which answer is the best example of a noncash item that would be included on the income statement?Write down of inventoryUnrealized losses from investmentsAll of these answersDepreciation and Amortization All of these answers
Which of the following is the correct order of how assets should be presented on a balance sheet?Accounts receivable; cash; inventory property, plant, and equipment (PPE).Cash; inventory; accounts receivable; property, plant, and equipment (PPE).Cash; inventory; property, plant, and equipment (PPE); accounts receivable.Cash; accounts receivable; inventory; property, plant, and equipment (PPE). Cash; accounts receivable; inventory; property, plant, and equipment (PPE).
The balance sheet is the only financial statement which . Applies to a single point in time in a business calendar year
Which of the following is not a component of the Cash Flow Statement?Cash Flow from FinancingCash Flow from SalesCash Flow from InvestingCash Flow from Operations Cash Flow from Sales
Financial Ratios help to identify some of the financial strengths and weaknesses of a company. What are two ways that the ratios provide for making meaningful comparisons of a firm’s financial data?Smoothing out differences when comparing firms that use different accounting practices and restating accounting data in relative terms.Identifying year over year changes in balance sheet and income statement items.Examining ratios across time to identify trends and comparing the firm’s ratios with those of other firms.Determining how long it takes to collect the firm’s receivables and how long it takes to pay it accounts payables. Examining ratios across time to identify trends and comparing the firm’s ratios with those of other firms.
Which of the following is not an example of benchmarking using ratio analysis?Calculate a company’s debt ratio and compare it to its industry’s average debt ratio.Calculate the company’s current ratio by comparing its current assets with its current liabilities.Contrast a company’s current ratio with its nearest competitors.Compare the company’s gross profit margin to the average gross profit margin of the top three firms in its industry. Calculate the company’s current ratio by comparing its current assets with its current liabilities.
Which of the following is an example of trend analysis?The company’s gross profit margin is compared with its industry’s average profit margins.The company compares its current assets to its current liabilities.All of these answers.The company’s current gross profit margin is compared with its gross profit margin from past years. The company’s current gross profit margin is compared with its gross profit margin from past years.
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? 0.15Operating margin = EBIT/Revenue. We calculate EBIT = Revenue – Operating expenses = $20,000,000 – $17,000,000 = $3,000,000. Hence, Operating Margin = $3,000,000/$20,000,000 = 0.15.
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? 6.667Return on Equity = Net Income/Equity = $10,000,000/$1,500,000 = 6.667.
Which of the following is not a statistical forecasting method?Time SeriesJudgmentalLongitudinal dataCross-sectional Judgmental
The percentage of sales forecasting method is used by management to forecast which of the following?Cash needed to finance future sales growth.Profit expected for a given percentage increase in sales.Debt financing needed by the firm.Capital financing needed to promote marketing efforts. Cash needed to finance future sales growth.
In using the percentage of sales forecasting method, the assumption is that Inventories will increase proportionately with sales.
Last year T&J Inc. reported total assets of $250 million, equity of $120 million, net income of $50 million, dividends of $15 million, and retained earnings of $35 million. What is T&J Inc.’s sustainable growth rate? 29.17% SGR = ROE (1-b) = (50/120) x [1- (15/50)] = 29.17%
A firm has projected current assets to be $205 million, fixed assets to be $605 million, current liabilities to be $188 million, long-term debt to be $461 million, and owner’s equity to be $106 million. Given this information, what is the discretionary financing need? 55 million
Suppose a company is planning to increase its dividend payout ratio next year. Given this information, which of the following cases do you expect to occur in the upcoming year?A decrease in the firm’s stock priceA reduction in the dividend received by investorsAn increase in discretionary financing neededA reduction in net income An increase in discretionary financing needed

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