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Multiple Choice Quiz
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1

Of the following assets, which is generally the most liquid?
A)Plant and equipment
B)Inventory
C)Goodwill
D)Accounts receivable
2

Intangible fixed assets would include:
A)Building
B)Machinery
C)Trademarks
D)Equipment
3

Net working capital (NWC) is calculated as:
A)Total assets - total liabilities
B)Current assets + current liabilities
C)Current assets - current liabilities
D)None of the above
4

Which of the following is an example of liquidity ratios?
A)Times interest earned (TIE)
B)Quick ratio
C)Return on equity
D)Tobin's q
5

If the debt ratio is 0.5 what is the debt-equity ratio?
A)0.5
B)1.0
C)1.5
D)2.0
E)None of the above
6

Given the following data: EBIT = 100; Depreciation = 40; Interest = 20; Dividends = 10; calculate the Times Interest Earned (TIE) ratio.
A)5.0
B)7.0
C)4.7
D)14.0
E)None of the above
7

Given the following data: Sales = 2000; Cost of goods sold = 1500; Average total assets = 1600; Average inventory = 100, calculate the asset turnover ratio:
A)1.25
B)0.9375
C)1.33
D)None of the above
8

Which of these statements characterizes Tobin's q?
A)The numerator is the market value of the firm's equity
B)Firms have an incentive to invest when q is less than 1
C)Firms with a strong competitive advantage tend to have a low q
D)The denominator includes all assets, not just the firm's net worth
E)None of the above
9

Which of the following would be included in a typical financial plan?
A)A summary of planned financing
B)Pro forma balance sheets and income statements
C)Planned capital expenditures by division or line of business
D)A narrative description of business strategies for reaching the company's financial goals
E)All of the above
10

Which of the following statements is true?
A)Corporate financial models are usually based on accounting concepts
B)Corporate financial models usually calculate the NPV of the firm's investment plan
C)Corporate financial models usually calculate the firm's optimal debt ratio
D)All of the above
11

The sustainable growth rate is equal to:
A)The plowback ratio times the return on equity
B)The return on equity divided by the plowback ratio
C)The return on assets times the plowback ratio
D)The plowback ratio times the return on equity times the ratio of equity to assets
12

Last year Simon Inc. reported total assets of $200, equity of $70, net income of $50, dividends of $15 and retained earnings of $35. What is Simon Inc's sustainable growth rate?
A)25.0%
B)57.1%
C)50.0%
D)71.4%
13

The primary source of the firm's cash flow is usually:
A)Net income
B)Tax credits
C)Earnings before interest and depreciation minus taxes
D)Capital spending after taxes
E)Working capital requirements
14

Sales forecasts are the starting point for financial planning
A)True
B)False
15

The growth rate that a company can achieve with external funds is called the internal growth rate.
A)True
B)False





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