Profitability Analysis and Analytical Issues MCQs

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In the current year, Griffin, Inc., had $15 million in sales, while total fixed costs were held to $6 million The firms total assets averaged $20 mil...






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White Knight Enterprises is experiencing a growth rate of 9% with a return on assets of 12%. If the debt ratio is 36% and the market price of the stoc...






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In Year 3, Newman Manufacturings gross profit margin remained unchanged from Year 2. But in Year 3, the companys net profit margin declined from the...






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Colonie, Inc., expects to report net income of at least $10 million annually for the foreseeable future. Colonie could increase its return on equity b...






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The president of Reading Manufacturing, Inc., is establishing performance goals for each of the companys manufacturing plants The data below represen...






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Acme Company has sales of $100,000, cost of sales of $40,000, interest expense of $4,000, taxes of $18,000 and operating expenses of $15,000, What is ...






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For a given level of sales and holding all other financial statement items constant a companys return on equity (ROE) will






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Anderson Cable wishes to calculate its return on assets. You know that the return on equity is 12% and that the debt ratio is 40%. What is the return ...






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The following information pertains to Andrew Co. for the year ended December 31: Sales $720,000 Net income 120,000 Average total assets 480,000 Wh...






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Transnational Motors has decided to make an additional investment in its operating assets, which are financed by debt. Assuming all other factors rema...






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Interstate Motors has decided to make an additional investment in its operating assets that are financed by debt. Assuming all other factors remain co...






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Of the following items, the one item that would not be considered in evaluating the adequacy of the budgeted annual operating income for a company is ...






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Last year, a corporation had a total asset turnover ratio of 1.5, a profit margin of 10%, and an equity multiplier of 2. This year, if the profit marg...






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A corporations return on equity can be calculated if you know its






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Which one of the following actions may increase a companys return on assets?






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The DuPont formula involves which combination of financial elements in its computation?






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According to the DuPont formula, which one of the following will not increase a profitable firms return on equity?






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Book value per common share represents the amount of equity assigned to each outstanding share of common stock. Which one of the following statements ...






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The issuance of new shares in a five-for-one split of common stock






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The book value per share calculation of a corporation is usually significantly different from the market value of the stocks selling price due to the...






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The equity section of Jones Corporations statement of financial position is presented below: Preferred stock, 6%, $100 par $40,000,000 Common stock...






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Which one of the following statements about the price-earnings (P/E) ratio is true?






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Information concerning Hamiltons common stock is presented below for the fiscal year ended May 31, Year 2. Common stock outstanding 750,000 Stated ...






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The following information is provided about the common stock of Evergreen, Inc., at the end of the fiscal year: Number of shares outstanding 1,800,00...






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Information concerning the common stock of Morris Company as of November 30, the end of the companys current fiscal year is presented below Number o...






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Kevlin, Inc., has 250,000 shares of $10 par value common stock outstanding. For the current year, Kevlin paid a cash dividend of $3.50 per share and h...






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A steady drop in a firms price-earnings ratio could indicate that






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At year end, Appleseed Company reported net income of $588,000. The company has 10,000 shares of $100 par value, 6% preferred stock and 120,000 shares...






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Archer, Inc., has 500,000 shares of $10 par value common stock outstanding. For the current year, Archer paid a cash dividend of $4.00 per share and h...






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When reviewing a credit application, the credit manager should be most concerned with the applicants






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Donovan Corporation recently declared and issued a 50% stock dividend. This transaction will reduce the companys






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What type of ratio is earnings per share?






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A company had 150,000 shares outstanding on January 1. On March 1, 75,000 additional shares were issued through a stock dividend. Then on November 1, ...






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Blackmer Company had 80,000 shares of common stock outstanding as of December 1, Year 1 the beginning of the company’s fiscal year The company also ...






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The Dwyer Company balance sheet indicates that the company has $2,000,000 of 7.5% convertible bonds, $1,000,000 of 9% preferred stock, par value $100,...






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For the year ended May 31, Year 2, Cooper, Inc., had per-share earnings of $4.80 Coopers outstanding stock for the Year 1-Year 2 fiscal year consiste...






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Baylor Company paid out one-half of last years earnings in dividends Baylors earnings increased by 20%, and the amount of its dividends increased by...






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Residco, Inc., expects net income of $800,000 for the next fiscal year. Its targeted and current capital structure is 40% debt and 60% common equity. ...






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All else being equal, a company with a higher dividend-payout ratio will have a debt-to-assets ratio and a current ratio. List A List B






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Which of the following is correct for a firm with $100,000 in net earnings, 10,000 shares, and a 30% payout ratio?






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Rinker Corporation had 40,000 shares of common stock outstanding on November 30, Year 1. On May 20, Year 2, a 10% stock dividend was declared and dist...






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A drop in the market price of a firms common stock will immediately increase its






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Watson Corporation computed the following items from its financial records for the year: Price-earnings ratio 12 Payout ratio 0.6 Asset turnover ra...






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An increase in the market price of a companys common stock will immediately affect its






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For the most recent fiscal period, Oakland, Inc., paid a regular quarterly dividend of $0.20 per share and had earnings of $3.20 per share. The market...






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The dividend yield ratio is calculated by which one of the following methods?






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Mayson Company reported net income of $350,000 for last year. The company had 100,000 shares of $10 par value common stock outstanding and 5,000 share...






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Douglas Company purchased 10,000 shares of its common stock at the beginning of the year for cash. This transaction will affect all of the following e...






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Mayson Ltd. reported net income of 3,500,000 for last year. The company had 100,000 shares of common stock outstanding with a par value of 1 and 5,0...






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A corporation has an earnings yield of 12% and a dividend yield of 3%. What is its dividend payout ratio?






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Keefer, Inc., recently reported earnings per share of $3.00. A security analyst recently issued a report that Keefer earnings are forecasted to grow t...






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If a stock currently sells for $40.00 and has annual earnings per share of $3.00, the P/E ratio is






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The capacity of the firms operations to produce cash inflows is






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When calculating ratios involving income, an adjustment is most likely to be made for






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Which of the following is an item with high earnings persistence?






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The key difference between accounting profit and economic profit is that economic profit






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A company could negatively affect its earnings quality if it frequently






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Baldwin Corporations inventory expressed as a percentage of current assets increased from 25% last July to 35% this July. The factor that is least li...






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Which one of the following ratios would be most affected by miscellaneous or non-recurring income?






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Global Company bought a new machine and estimated that the machine will have a useful life of 10 years and a salvage value of $5,000. After the machin...






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At the beginning of last year, Falcon Manufacturing Co. increased its selling price by $10 per unit This price increase has no effect on the volume of...






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Hampel Corporations gross profit margin has decreased substantially over the past 3 years Which one of the following best explains this decrease?






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Grimball Corporations gross profit margin has remained fairly constant for the past several years. Which one of the following is the best explanation...






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Network Corporation made a large arithmetic error in the preparation of its year-end financial statements by improper placement of an extra digit in ...






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A construction company has signed $1,000,000 in new contracts. During the current year, 10% of the required work for these contracts was performed. Hi...






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A U.S. company and a German company purchased the same stock on the German stock exchange and held the stock for 1 year. The value of the euro weakene...






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If an entitys books of account are not maintained in its functional currency U S GAAP require remeasurement into the functional currency prior to the...






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U.S. GAAP require the application of the functional currency concept. Before the financial statements of a foreign subsidiary may be translated into t...






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The economic effects of a change in foreign exchange rates on a relatively self-contained and integrated operation within a foreign country relate to ...






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U.S. GAAP require that, in a highly inflationary economy, the financial statements of a foreign entity be remeasured as if the functional currency wer...






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U.S. GAAP state that transaction gains and losses have direct cash flow effects when foreign-denominated monetary assets are settled in amounts greate...






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U.S. GAAP define foreign currency transactions as those denominated in other than an entitys functional currency. Transaction gains and losses are re...






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Unrealized foreign currency gains and losses included in the other comprehensive income section of a consolidated balance sheet represent






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When restating financial statements originally recorded in a foreign currency,






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Formerly, there was significant disagreement among informed observers regarding the basic nature, information content, and meaning of results produced...






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The Brinjac Company owns a foreign subsidiary Included among the subsidiarys liabilities for the year just ended are 400,000 drongos of revenue recei...






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FreezeIt, Inc., is a manufacturer of refrigeration systems based out of the United States with one subsidiary in Canada. The Canadian subsidiary expor...






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Willow World is a privately-held manufacturer of home furnishings based out of the United States. Willow World has one subsidiary in Mexico that expo...






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A U.S.-based company has transaction exposure if it has an account






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Which one of the following statements best reflects the relationship between the results of financial ratios calculated in a local currency versus tho...






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In financial statement analysis, expressing all financial statement items as a percentage of base-year amounts is called






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On a common-size balance sheet, what would represent 100%?






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A company has the following summarized income statement: Sales $1000 Sales returns and allowances 10 Cost of goods sold 600 Gross profit 390 Oper...






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In assessing the financial prospects for a firm, financial analysts use various techniques. An example of vertical, common-size analysis is






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Leases should be classified by the lessee as either operating leases or capital leases. Which of the following statements best characterizes operating...






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Careful reading of an annual report will reveal that off-balance-sheet debt includes






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Which one of the following is not a form of off-balance-sheet financing?






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An investment in trading securities is measured on the statement of financial position at the






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An investment in available-for-sale securities is measured on the statement of financial position at the






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When using fair value accounting it would be to a firms benefit to report the liability at fair value when it has