BMAL Finance Exam Questions and Answers With Verified Solutions 2025
A company's balance sheet shows the value of assets, liabilities, and stockholders equity - ✔✔At any
specific point in time
On a balance sheet, retained earnings are not "unspent cash" because - ✔✔They have been used to
finance the firm's assets
For both managers and external financial analysts, ___ is the single most important accounting number
found on the income statement - ✔✔Net income (net profit after tax)
Earnings per share (EPS) is calculated by - ✔✔Dividing earnings available for common stockholders by
the number of shares of common stock outstanding
Net working capital - ✔✔Is a measure of a firms overall liquidity
Why is the quick ratio a more appropriate measure of liquidity then the current ratio for a large airplane
manufacturer - ✔✔It excludes inventory from the numerator of the ratio because it is difficult to
convert inventory to cash and most sales are made on a credit basis
The one fixed asset that is not depreciated is - ✔✔Land
Return on total assets (ROA) is equal to - ✔✔All of the above
When a firm has no "other income" it's operating profit and ___ are equal - ✔✔EBIT
The firm's ___ are primarily interested in ratios that measure the short term liquidity of the company
and its ability to make principal and interest payments - ✔✔Creditors
When evaluating financial ratios, analysts typically examine a firm's ratio values - ✔✔Compared to the
firm's previous years ratios
, ___ ratios would provide the best information regarding total return to common stockholders -
✔✔Profitability
The firm's managers use ratios to ___ - ✔✔All of the above
The ___ flows result from debt and equity financing transactions - ✔✔Financing
Which of the following is an inflow if corporate cash - ✔✔Depreciation charges
The bottom up method for forecasting sales - ✔✔Relies on the ability of sales personnel to assess future
demand, usually without the aid of statistical models
Following ___ financing strategy takes advantage of short term interest rates but also increases
refinancing risk. Following ___ financing strategy minimizes the risk of liquidity crisis, but generally
increases borrowing cost. Following ___ financing strategy results in the use of long term funding for
permanent assets and short term financing for temporary or seasonal requirements. - ✔✔None of the
above
The sustainable growth model gives managers a kind of shorthand projection that ties together ___ and
___. - ✔✔Growth objectives and financial needs
The key input required to build a cash budget is ___. - ✔✔The firm's sales forecast
Which of the following are common cash disbursements? - ✔✔All of the above
Most pro forms statements begin with a sales forecast. One approach to deriving a sales forecast is the
top-down approach. Top-down sales forecasts rely heavily on - ✔✔Macroeconomics and industry
forecasts
A firm that employs an aggressive strategy to finance assets - ✔✔Will finance a portion of long-term
(permanent) growth in assets with short term financing
A company's balance sheet shows the value of assets, liabilities, and stockholders equity - ✔✔At any
specific point in time
On a balance sheet, retained earnings are not "unspent cash" because - ✔✔They have been used to
finance the firm's assets
For both managers and external financial analysts, ___ is the single most important accounting number
found on the income statement - ✔✔Net income (net profit after tax)
Earnings per share (EPS) is calculated by - ✔✔Dividing earnings available for common stockholders by
the number of shares of common stock outstanding
Net working capital - ✔✔Is a measure of a firms overall liquidity
Why is the quick ratio a more appropriate measure of liquidity then the current ratio for a large airplane
manufacturer - ✔✔It excludes inventory from the numerator of the ratio because it is difficult to
convert inventory to cash and most sales are made on a credit basis
The one fixed asset that is not depreciated is - ✔✔Land
Return on total assets (ROA) is equal to - ✔✔All of the above
When a firm has no "other income" it's operating profit and ___ are equal - ✔✔EBIT
The firm's ___ are primarily interested in ratios that measure the short term liquidity of the company
and its ability to make principal and interest payments - ✔✔Creditors
When evaluating financial ratios, analysts typically examine a firm's ratio values - ✔✔Compared to the
firm's previous years ratios
, ___ ratios would provide the best information regarding total return to common stockholders -
✔✔Profitability
The firm's managers use ratios to ___ - ✔✔All of the above
The ___ flows result from debt and equity financing transactions - ✔✔Financing
Which of the following is an inflow if corporate cash - ✔✔Depreciation charges
The bottom up method for forecasting sales - ✔✔Relies on the ability of sales personnel to assess future
demand, usually without the aid of statistical models
Following ___ financing strategy takes advantage of short term interest rates but also increases
refinancing risk. Following ___ financing strategy minimizes the risk of liquidity crisis, but generally
increases borrowing cost. Following ___ financing strategy results in the use of long term funding for
permanent assets and short term financing for temporary or seasonal requirements. - ✔✔None of the
above
The sustainable growth model gives managers a kind of shorthand projection that ties together ___ and
___. - ✔✔Growth objectives and financial needs
The key input required to build a cash budget is ___. - ✔✔The firm's sales forecast
Which of the following are common cash disbursements? - ✔✔All of the above
Most pro forms statements begin with a sales forecast. One approach to deriving a sales forecast is the
top-down approach. Top-down sales forecasts rely heavily on - ✔✔Macroeconomics and industry
forecasts
A firm that employs an aggressive strategy to finance assets - ✔✔Will finance a portion of long-term
(permanent) growth in assets with short term financing
