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The Language and Tools of Financial Analysis

The Language and Tools of Financial Analysis Answer. In this post you will get Quiz & Assignment Answer Of The Language and Tools of Financial Analysis

 

The Language and Tools of Financial Analysis

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Week 1 graded quiz

1.
Question 1
The asset section of the balance sheet summarizes:

1 point

Cash transactions

Revenues and expenses

What the company owns

What the company owes

2.
Question 2
Total assets equal:

1 point

Current assets + non-current assets

Residual claim after all liabilities are repaid

Cash + accounts receivable

Current assets + property plant equipment

3.
Question 3
Which of the following would NOT be found in the liabilities section of the balance sheet?

1 point

Property plant & equipment

Pension liability

Accounts payable

Notes payable

4.
Question 4
Which of the following equations represents the calculation of a firm’s liabilities?

1 point

Assets – Equity

Equity – Assets

Assets – Liabilities – Equity

Assets + Equity

5.
Question 5
Which of the following is a key characteristic of a public corporation?

1 point

Private company

Shareholders are also debtholders

Full government ownership

Separate ownership and management of assets

6.
Question 6
Which of the following equations represent the residual claim on a firm’s assets?

1 point

Assets – Equity

Assets – Liabilities – Equity

Assets – Liabilities

Equity + Liabilities

7.
Question 7
The ‘bottom line’ in a profit and loss statement is:

1 point

Net income (or earnings)

Expenses

Gross income

Revenues

8.
Question 8
Which of the following is NOT included in the operating profit figure?

1 point

Cost of goods sold

Net sales

Interest expense

Selling, general and administrative expenses

9.
Question 9
Which of the following is equal to gross profit?

1 point

EBT – tax

Net sales – cost of goods sold

Operating profit + other income

EBIT – interest

10.
Question 10
Net income equals:

1 point

EBT – tax

EBITDA

EBIT – interest

Operating income

 

Week 2 graded quiz

 

1.
Question 1
Operating margin equals:

1 point

Gross profit/Assets

Operating income/Sales

Operating income/Cost of goods sold

Gross profit/Owners equity

2.
Question 2
ROA equals:

1 point

Gross profit/Owners equity

Net income/[(average) BV of equity]

Gross profit/assets

Net income/[(average) BV of assets]

3.
Question 3
Earnings per share equals:

1 point

Gross profit/Owners equity

Net income/Average outstanding number of shares

Net income/Liabilities

Gross profit/Assets

4.
Question 4
What are the most often quoted and related financial ratios?

1 point

Earnings per share and Price/Earnings

Earnings per share and Price/Sales

Price/Earnings and gross margin

Operating margin and gross margin

5.
Question 5
Debt-equity ratio equals:

1 point

Total equity/Total debt

Total debt/Total assets

Total debt/Total equity

Total assets/Total debt

6.
Question 6
The current ratio equals:

1 point

Gross profit/Sales

Equity/ Current liabilities

Total debt/Total equity

Current assets/Current liabilities

7.
Question 7
The quick ratio will always be equal to, or larger than, the cash ratio.

1 point

False

True

8.
Question 8
Debt is generally considered a cheaper form of funding than equity funding?

1 point

False

True

9.
Question 9
What do efficiency “activity” ratios capture?

1 point

The firms ability to manage current assets and current liabilities

The firms ability to effectively use its assets in generating revenue

Stock price movements

The firms ability to meet short term liabilities

10.
Question 10
Total asset turnover equals:

1 point

Sales/(average)Total assets

Total debt/Total equity

Gross profit/Sales

Current assets/Current liabilities

 

 

Week 3 graded quiz

1.
Question 1
How do accountants arrive at the book value for an asset?

1 point

Accountants don’t record assets at book value or market value

Historical cost, less accumulated depreciation

Accountants only use market value to value assets

Historical cost

2.
Question 2
Market value is commonly referred to as the book value.

1 point

True

False

3.
Question 3
What is a disadvantage of accrual accounting?

1 point

There are no disadvantages

Matches cash received to expenses made

Requires monitoring cash flow separately

Makes business more flexible

4.
Question 4
Most well-known large firms use cash basis accounting instead of accrual accounting as it helps to keep track of their large and complex cash positions

1 point

False

True

5.
Question 5
Which of the following is of less concern when choosing cash basis accounting as opposed to accrual accounting?

1 point

Business gets paid immediately for goods/services

An in-depth accounting understanding is required for accrual accounting

Payment terms for supplier invoices

Accrual accounting is more complicated than cash accounting

6.
Question 6
Wealth maximization focuses on:

1 point

Revenues

Profit

Accruals

Cash flows

7.
Question 7
What do businesses focus on when evaluating various business propositions?

1 point

Discount rates

Net present value of future cash flows

Terminal value

Cost of capital

8.
Question 8
The current ratio formula is:

1 point

Current assets/Current liabilities

Total debt/Total equity

Gross profit/Sales

Equity/ Current liabilities

9.
Question 9
What is the key reason for managers to engage in earnings management?

1 point

Smooth earnings over time to avoid volatility

There is no key reason

Smooth cash flow

To increase the company’s total assets

10.
Question 10
Which of the following doesn’t represent an earnings management method?

1 point

Alterations in shipment schedules

Delaying research and development (R&D) expenditures

Acceleration of sales

Minimizing cash expenses

 

 

Week 4 graded quiz

1.
Question 1
Which of the following does the discount rate r (eg: 4% p.a.) NOT account for?

1 point

risk-free interest rate

the expected value of the cash flow

expected inflation

opportunity cost

2.
Question 2
If I invest $600 today at an annual interest rate of 5% p.a. (interests reinvested), after 8 years my investment will be worth more than $850

1 point

True

False

3.
Question 3
The quality of an analyst’s earnings forecast does NOT depend on which of the following:

1 point

The analyst’s interpretation of historical information

Unexpected future events that are unpredictable in nature

The quality of the analyst’s financial model

The analyst’s interpretation of ‘environmental’ information (eg: macroeconomic news)

4.
Question 4
At which of the following discount rates would the following investment ‘break even’:

Initial cost of $11,000, cash flows of $6,000 for two years

1 point

4%

5%

6%

7%

5.
Question 5
According to NPV analysis, should the following project be undertaken?

Initial gain of $10,500; negative cash flows of $6,000 for two years with a 8% p.a. discount rate

1 point

Yes

No

We are indifferent (NPV = $0)

We do not have enough information

6.
Question 6
At which of the following discount rates would the following investment ‘break even’:

Initial cost of $3,000, cash flows of $1,682.5 for 2 years

1 point

6% p.a.

7% p.a.

8% p.a.

9% p.a.

7.
Question 7
Calculate the NPV of a project with an initial cost of $1,000,000; and positive cash flows of $300,000 for the next 5 years with a 10% p.a. discount rate:

1 point

$327,343

$137,236

$500,000

$97,579

8.
Question 8
Calculate the NPV of a project that has no initial cost ($0) however will provide the following cash flows with a discount rate of 8% p.a.

Yr1: $4,000

Yr2: -$3,000

Yr3: $80,000

1 point

$64,638

$81,000

$56,743

$61,699

9.
Question 9
If a firm is considering 2 independent investment proposals (Investment A: NPV $4,000 & Investment B: NPV $2,500), both of which take the same time to complete, then it is correct to say the firm should invest in A instead of investing in B.

1 point

False

True

10.
Question 10
Calculate the NPV of a project that has an initial cost of $10,000 and three years of positive $3,000 cash flows with a discount rate of 0% p.a.

1 point

We cannot calculate this with the information given

$1,563

-$1,000

-$436

 

 

Course Final Exam

 

1.
Question 1
$1000 expected in two years’ time with a discount rate of 10% p.a. is worth what today?

1 point

$980

$874

$826

$909

2.
Question 2
What is the future value of $1,000 today in 3 years’ time, assuming a discount rate of 7% p.a.

1 point

$1,378

$4,913

$1,225

$1,070

3.
Question 3
$4,000 expected in 3 years at a discount rate of 4% p.a. is worth less than $3,500 in today’s terms.

1 point

True

False

4.
Question 4
How many years would it take to triple an initial investment with an interest rate of 14% p.a.

1 point

3 Years

5.7 Years

9.8 Years

8.4 Years

5.
Question 5
If we could only choose one, which of the following projects should be selected according to an NPV analysis?

1 point

NPV = $4 million

NPV = $0

NPV = $8 million

NPV = -4 million

6.
Question 6
Calculate the NPV of a project which has an initial cost of $20,000 and will provide cash flows of $15,000 for the next 2 years with a discount rate of 6% p.a.

1 point

$12,254

$10,000

$5,501

$7,501

7.
Question 7
According to NPV analysis, should the following project be undertaken?

Initial cost of $15,000; cash flows of $7,000 for three years with a 6% p.a. discount rate

1 point

Yes

No

We are indifferent (NPV = $0)

We do not have enough information

8.
Question 8
Calculate the NPV of a project that has no initial cost ($0) however will provide the following cash flows with a discount rate of 5% p.a.

Yr1: $5,000

Yr2: -$7,000

Yr3: $6,000

1 point

$3,879

$4,000

$4,134

$3,596

9.
Question 9
According to NPV analysis, should the following project be undertaken?

Initial gain of $10,000; negative cash flows of $4,000 for three years with a 6% p.a. discount rate

1 point

We are indifferent (NPV = $0)

No

We do not have enough information

Yes

10.
Question 10
If no positive NPV projects are available, it is correct to say a firm should invest in the least negative project available.

1 point

False

True

11.
Question 11
Price to book ratio equals:

1 point

Market capitalization/Book value of equity

Gross Profit/Owners Equity

Market capitalization/Book value of assets

Gross Profit/Assets

12.
Question 12
What is market value also known as?

1 point

Fair value

Historical cost

Acquisition cost

Book value

13.
Question 13
In what scenario should cash-basis accounting generally not be used?

1 point

If all sales are in cash

If expenses are paid in cash

If sales are on credit

If expenses are paid immediately

14.
Question 14
What is an advantage of accrual accounting?

1 point

There are no advantages

Income statement may hide cash flow problems

Matches cash received to expenses incurred

Requires monitoring cash flow separately

15.
Question 15
An advantage of cash basis accounting is that is matches clearly the cash received for goods sold to the expenses incurred in making the goods

1 point

True

False

16.
Question 16
Most small and young business tend to use historical cost accounting

1 point

True

False

17.
Question 17
Corporations looking after the interests of shareholders should focus on:

1 point

Minimizing expenses at all costs

Any business operation regardless of whether it is sustainable or not

Short term business decisions

Wealth maximization

18.
Question 18
Direct evidence of wealth maximization can most clearly be signaled by changes in:

1 point

Market value of equity

The commodity market

The currency market

Market value of debt

19.
Question 19
A rise in market capitalization (without any associated equity raisings) signals evidence of wealth creation by the firm

1 point

False

True

20.
Question 20
Who do corporation owners rely mostly on to further their interests?

1 point

Executive management

Governments

Competitors

Employees

21.
Question 21
Gross margin equals:

1 point

Gross profit/Sales

Gross profit/Assets

Gross profit/Owners equity

Gross profit/Liabilities

22.
Question 22
Gross margin measures the:

1 point

Firms’ ability to sell a product for more than the direct cost of production

Gross sales of the firm

Firms ability to sell a product for more than the indirect cost of production

Gross profit of the firm

23.
Question 23
Price/Earnings ratio equals:

1 point

Share price/Liabilities

Share price/Earnings per share

Share price/Earnings

Share price/Asset

24.
Question 24
Are forward-looking Price/Earnings ratios stable?

1 point

Sometimes. Only when dividend payout ratios are constant in the market

No. They are volatile

Only after the GFC

Yes. They are constant

25.
Question 25
Profitability focuses on:

1 point

Return to government

Return to owners

Return to debt holders

Return to suppliers

26.
Question 26
High levels of debt can create:

1 point

Higher distress risk

Lower distress risk

Flexibility to pay dividends

Flexibility to invest in positive NPV projects

27.
Question 27
What do we divide revenues by in order to estimate a firm’s total asset turnover?

1 point

Net income

(average) Total assets

Interest expense

EBIT

28.
Question 28
Inventory turnover equals:

1 point

Cost of goods sold/ (average) Inventory

Sales/Total assets

Current assets/Current liabilities

Gross profit/Sales

29.
Question 29
What does accounting liquidity measure?

1 point

Long term solvency

Efficiency

Short term solvency

Productivity

30.
Question 30
In the quick ratio fraction, “near cash” includes:

1 point

Cash

Short-term investments and accounts receivable

Pre-paid expenses

Inventory

31.
Question 31
Which of the following is a non-current asset?

1 point

Inventory

Accounts receivable

Goodwill

Cash

32.
Question 32
Which of the following equations represents the calculation of an asset’s book value?

1 point

Current assets – Current liabilities

Investment purchase price – Book value of investment

Acquisition cost – (Accumulated) Depreciation expense

Investment purchase price – Current liabilities

33.
Question 33
Which of the following is a current liability?

1 point

Long-term debts

Accounts payable

Deferred income taxes

Pension liabilities

34.
Question 34
Which of the following is a non- current liability?

1 point

Notes payable

Pension liability

Current maturities of long-term debt

Prepaid short-term expenses

35.
Question 35
Total liabilities equals:

1 point

Current liabilities

Non-current liabilities

Current liabilities + non-current liabilities

Equity – Assets

36.
Question 36
Which measures are needed to compute the market value of equity?

1 point

Retained earnings & number of shares

Retained earnings

Current assets & number of shares

Share price & number of shares

37.
Question 37
Which of the following is a key characteristic of being a shareholder?

1 point

Shareholders must receive interest payments

Shareholders own debt in companies and not equity

Shareholders can never sell their shares

Shareholders may sell their shares

38.
Question 38
Which of the following is NOT included in deductions?

1 point

Customer discounts

Tax expense

Allowances

Returns

39.
Question 39
Which of the following items would be listed the furthest down a profit & loss statement?

1 point

Operating profit

Interest expenses

Cost of goods sold

Income taxes

40.
Question 40
Which of the following must be disclosed in the notes to the profit and loss statement?

1 point

Income tax

Selling expenses

Disposals of property, plant and equipment or investments

Sales revenue

 

Peer-graded Assignment: Peer Assessment – This contributes 10% towards your final grade

 

Click Here To Download

 

Peer Assessment Calculations

1.
Question 1
What is the Gross Margin (%) for 2012?

Note: Just enter the round numbers making up the percentage (%) of your answer. e.g. 78 (not 78% or 77.5)

1 point
Enter answer here

7

2.
Question 2
What is the EPS for 2012?

Note: Just enter the numbers making up your answer to two decimal places. e.g. 9.12 or 12.03

1 point
Enter answer here

2.68

3.
Question 3
What is the Debt/Assets Ratio for 2012?

Note: Just enter the numbers making up your answer to two decimal places. e.g. 9.12 or 12.03

1 point
Enter answer here

5.8

4.
Question 4
What is the Total Asset Turnover for 2012?

Note: Just enter the numbers making up your answer to two decimal places. e.g. 9.12 or 12.03 or 4.10

1 point
Enter answer here

33.96

5.
Question 5
What is the Current Ratio for 2012?

Note: Just enter the numbers making up your answer to two decimal places. e.g. 9.12 or 12.03 or 0.09

1 point
Enter answer here

.74

6.
Question 6
Consider the following investment proposal for a 6-year project.

The investment has an upfront cost of $1,500,000.

The proposal is expected to generate cash inflows for 6 years according to the following schedule: Year 1: $750,000; Year 2: $1,500,000; Year 3: $2,000,000; Year 4: $1,250,000; Year 5: $1,000,000; Year 6: $500,000.

Each year of operation you must also pay the cost of labour attached to the project – a cash outflow of $750,000 per year.

You have estimated that the appropriate discount rate for the project is 11% per annum.

Which of the following is closest to the calculated NPV of the project:

1 point

$366,774

– $368,455

$515.423

$518,525

$752,252

$1,866,774

 

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