MC

Question 1

Other things held constant, which of the following actions would increase the amount of cash on a company’s balance sheet?

a. The company repurchases common stock
b. The company pays a dividend
c. The company issues a new common stock
d. The company gives customers more time to pay the bills
e. The company purchases a new piece of equipment

Answer 1

c. The company issues a new common stock

Question 2

Which of the following items cannot be found on a firm’s balance sheet under current liabilities?

a. Accounts payable
b. Short-term notes payable to the bank
c. Accrued wages
d. Cost of Goods Sold
e. Accrued payroll taxes

Answer 2

d. Cost of Goods Sold

Question 3

Which of the following items is NOT normally considered to be a current asset?

a. Accounts receivable
b. Inventory
c. Bonds
d. Cash
e. Short-term, highly-liquid, marketable securities

Answer 3

c. Bonds

Question 4

Considered alone, which of the following would INCREASE a company’s current ratio?

a. An increase in net fixed assets
b. An increase in accrued liabilities
c. An increase in notes payable
d. An increase in accounts receivable
e. An increase in accounts payable

Answer 4

d. An increase in accounts receivable

Question 5

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

Answer 5

c. The quick ratio increases

Question 6

Companies E and P each reported the same earnings per share (EPS), but Company ‘s stock trades at a higher price. Which of the following statements is CORRECT?

a. Company E probably has fewer growth opportunities
b. Company E is probably judged by investors to be riskier
c. Company E must have a higher market-to-book ratio
d. Company E must pay a lower dividend
e. Company E trades at a higher P/E ratio

Answer 6

e. Company E trades at a higher P/E ratio

Question 7

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

a. Increase accounts receivable while holding sales constant
b. Increase EBIT while holding sales constant
c. Increase accounts payable while holding sales constant
d. Increase notes payable while holding sales constant
e. Increase inventories while holding sales constant

Answer 7

b. Increase EBIT while holding sales constant

Question 8

The entrepreneur, angel investors, and venture capitalists (VCs) are important users of financial ratios and measures on which of the following life cycle stages?

a. Development Stage
b. Start-Up Stage
c. Survival Stage
d. Rapid-Growth Stage
e. All Four Stages

Answer 8

e. All Four Stages