Financial Analysis

  1. Question: Return on Assets is defined as _______.

    A
    Net Income/Current Assets

    B
    Net Income/Total Assets

    C
    Gross Margin/Current Assets

    D
    Gross Margin/Total Assets

    Note: Not available
    1. Report

  2. Question: Why would a company calculate their Risk Adjusted Return on Capital?

    A
    Is required by the SEC

    B
    Auditors will overlook other abnormalities if a firm demonstrates a favorable RAROC

    C
    Gives companies the ability to allocate capital in the optimal structure

    D
    Keeps the financial analysis department busy

    Note: Not available
    1. Report

  3. Question: What is the purpose of measuring profitability?

    A
    To determine the amount of cash a company brings in on an average in a month

    B
    To analyze specific expenses to look for cost cutting measures

    C
    To measure a company's ability to earn a profit and continue to grow in the short-term and long-term

    D
    To measure a company's ability to pay the highest dividend relative to its competitors

    Note: Not available
    1. Report

  4. Question: Operating Efficiency is defined as ______.

    A
    Net Income/Operating Expenses

    B
    Gross Profit/Operating Expenses

    C
    Gross Profit/Sales

    D
    Net Income/Sales

    Note: Not available
    1. Report

  5. Question: To measure a firm's solvency as completely as possible, we need to consider ______.

    A
    the firm's relative proportion of debt and equity in its capital structure

    B
    the firm's capital structure and the liquidity of its current assets

    C
    the firm's ability to use Net Working Capital to pay off its current liabilities

    D
    the firm's leverage and its ability to make interest payments on its long-term debt

    E
    the firm's leverage and its ability to turn its assets into sales

    Note: Not available
    1. Report

  6. Question: How does Gross Income differ from Net Income?

    A
    Gross Income determines the company's cash flow, Net Income does not

    B
    Gross Income includes several fixed costs, Net Income does not

    C
    Gross Income includes all fixed costs, Net Income does not include any

    D
    Gross Income measures profitability before operating expenses, whereas Net Income is calculated after all operating expenses

    Note: Not available
    1. Report

  7. Question: Which of the following are traded in the capital markets?

    A
    Convertible securities

    B
    Bonds

    C
    Common stock

    D
    Preferred stock

    E
    All of these

    Note: Not available
    1. Report

  8. Question: By doing/issuing which of the following could a company raise short-term funds by selling receivables?

    A
    By factoring receivable

    B
    By pledging inventory

    C
    By line of credit

    D
    By Notes

    E
    By term loan

    Note: Not available
    1. Report

  9. Question: Government mandated requirements, such as installing pollution control equipment ______.

    A
    increase a company's profits in the long run

    B
    drive many companies out of business

    C
    have resulted in many instances of unethical behavior on the part of managers

    D
    may reduce a company's earnings but are considered a necessary social responsibility for the firm

    E
    do not affect a firm's profit potential

    Note: Not available
    1. Report

  10. Question: Why do you not subtract interest expense from operating profit when calculating Return on Investment Capital?

    A
    Denominator includes debt capital

    B
    Numerator includes debt capital

    C
    Interest is not material in the calculation

    D
    It is important to include interest as it is part of expenses

    Note: Not available
    1. Report
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