Finance Session

A firm has just ended its calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The possible problem this firm may face is

• low profitability.

• lack of cash flow.

• inability to receive credit

• high leverage.

A firm with a total asset turnover that is lower than industry standard but with a current ratio which meets industry standard must have excessive

• fixed assets.

• inventory.

• accounts receivable.

• debt.

A firm with a total asset turnover lower than industry standard may have

• excessive debt.

• excessive cost of goods sold.

• insufficient sales.

• insufficient fixed assets.

A firm with a substandard net profit margin can improve its return on total assets by

• increasing its debt ratio.

• increasing its total asset turnover.

• decreasing its fixed asset turnover.

• decreasing its total asset turnover.

The stockholder's report may include all of the following EXCEPT

• a cash budget.

• an income statement.

• a statement of cash flows.

• a statement of retained earnings.

The ________ represents a summary statement of the firm's financial position at a given point in time.

• income statement

• balance sheet

• statement of cash flows

• statement of retained earnings

The ________ summarizes the firm's funds flow over a given period of time.

• income statement

• balance sheet

• statement of cash flows

• statement of retained earnings

On the balance sheet net fixed assets represent

• gross fixed assets at cost minus depreciation expense.

• gross fixed assets at market value minus depreciation expense.

• gross fixed assets at cost minus accumulated depreciation.

• gross fixed assets at market value minus accumulated deprecation.

The three summary ratios basic to the DuPont system of analysis are

• net profit margin, total asset turnover, and return on investment.

• net profit margin, total asset turnover, and return on equity.

• net profit margin, total asset turnover, and equity multiplier.

• net profit margin, financial leverage multiplier, and return on equity.

Using the DuPont system of analysis and holding other factors constant, an increase in financial leverage will result in ________ in the return on equity.

• an increase

• a decrease

• no change

• an undetermined change