Financial Statement Analysis Sample Exam

819 WordsAug 16, 20124 Pages
1. Return on equity (ROE) using the DuPont formula is: a) Earnings before Interest/Sales * Sales/Assets * Assets/Equity * Earnings before interest/Net Income b) Net income*asset turnover*tax rate c) Return on Assets (ROA)*financial leverage d) Both a) and c) 2. Which of the following is true a) Return on Assets is influenced by financing activities b) ROE is not affected by financial structure c) Profit margin is a measure of asset efficiency d) None of the above 3. Assume that cost of goods sold for a company consists only of variable costs and gross margin is = (revenue – cost of goods sold)/revenue. Which of the following is true a) Gross margin…show more content…
The book value at the beginning of the terminal year is 2 billion dollars. Using this information calculate the terminal value under this method. 16. In carrying out relative valuation, one of the issues to consider is differential risk between the target firm and the comparable. Which of the following factors could cause differences in risk between the two firms a) Risk-free rate b) Risk premium c) Beta d) Both b and c 17. The price to book multiple is most useful for valuing a) Software firms b) Banks c) Utilities 18. Companies that expense R&D costs to the income statement rather than capitalize them on the balance sheet would have: a) higher debt to total asset and debt to equity ratios b) lower debt to total asset ratio and debt to equity ratios c) higher debt to asset and lower debt to equity ratio d) higher debt to equity ratio and lower debt to asset ratio 19. A company has a quick ratio greater than 1. All else constant, which of the following transactions will increase a firm’s quick ratio? a) Cash is used to purchase inventory b) A/R is collected in cash c) Inventory is purchased on credit d) None of the above 20. A company has a P/E of 10, P/B of 3 and PEG ratio of 0.9. Calculate the firm’s

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