Corporate Finance Stephen Ross 12th Edition- Test
Bank ( CHApter 3& 5)
Chapter 3 Financial Statements and Cash Flow
1) Which statement expresses all relative account values as a percentage of total assets?
1. A) Pro forma balance sheet
2. B) Common-size income statement
3. C) Statement of cash flows
4. D) Pro forma income statement
5. E) Common-size balance sheet
Answer: E
Difficulty: 1 Easy
Section: 3.1 Financial Statements
Analysis Topic: Standardized financial
statements Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard
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2) You would like to compare your firm’s cost structure to that of your competitors.
However, your competitors are much larger in size than your firm. Which one of
these would best enable you to compare costs across your industry?
1. A) Pro forma balance sheet
2. B) Common-size income statement
3. C) Statement of cash flows
4. D) Pro forma income statement
,5. E) Common-size balance sheet
Answer: B
Difficulty: 1 Easy
Section: 3.1 Financial Statements
Analysis Topic: Standardized financial
statements Bloom’s: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
3) Which one of these terms is most synonymous with the term “income from
operations”?
1. A) TTM
2. B) EBIT
3. C) LTM
4. D) EBITDA
5. E) EPS
Answer: B
Difficulty: 1 Easy
Section: 3.1 Financial Statements
Analysis Topic: Standardized financial
statements Bloom’s: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
,4) Ratios that measure a firm’s ability to pay its bills over the short run without
undue stress are known as:
1. A) asset management ratios.
2. B) long-term solvency measures.
3. C) liquidity measures.
4. D) profitability ratios.
5. E) market value ratios.
Answer: C
Difficulty: 1 Easy
Section: 3.2 Ratio Analysis
Topic: Short-term solvency
ratios Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
5) The current ratio is measured as:
1. A) current assets minus current liabilities.
2. B) current assets divided by current liabilities.
3. C) current liabilities minus inventory, divided by current assets.
4. D) cash on hand divided by current liabilities.
5. E) current liabilities divided by current assets.
Answer: B
Difficulty: 1 Easy
Section: 3.2 Ratio Analysis
Topic: Short-term solvency
ratios Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
, 6) The quick ratio is measured as:
1. A) current assets divided by current liabilities.
2. B) cash on hand plus current liabilities, divided by current assets.
3. C) current liabilities divided by current assets, plus inventory.
4. D) current assets minus inventory, divided by current liabilities.
5. E) current assets minus inventory minus current liabilities.
Answer: D
Difficulty: 1 Easy
Section: 3.2 Ratio Analysis
Topic: Short-term solvency
ratios Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
7) Ratios that measure a firm’s financial leverage are known as ratios.
1. A) asset management
2. B) long-term solvency
3. C) short-term solvency
4. D) profitability
5. E) market value
Answer: B
Difficulty: 1 Easy
Section: 3.2 Ratio Analysis
Topic: Long-term solvency
ratios
Bank ( CHApter 3& 5)
Chapter 3 Financial Statements and Cash Flow
1) Which statement expresses all relative account values as a percentage of total assets?
1. A) Pro forma balance sheet
2. B) Common-size income statement
3. C) Statement of cash flows
4. D) Pro forma income statement
5. E) Common-size balance sheet
Answer: E
Difficulty: 1 Easy
Section: 3.1 Financial Statements
Analysis Topic: Standardized financial
statements Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
2) You would like to compare your firm’s cost structure to that of your competitors.
However, your competitors are much larger in size than your firm. Which one of
these would best enable you to compare costs across your industry?
1. A) Pro forma balance sheet
2. B) Common-size income statement
3. C) Statement of cash flows
4. D) Pro forma income statement
,5. E) Common-size balance sheet
Answer: B
Difficulty: 1 Easy
Section: 3.1 Financial Statements
Analysis Topic: Standardized financial
statements Bloom’s: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
3) Which one of these terms is most synonymous with the term “income from
operations”?
1. A) TTM
2. B) EBIT
3. C) LTM
4. D) EBITDA
5. E) EPS
Answer: B
Difficulty: 1 Easy
Section: 3.1 Financial Statements
Analysis Topic: Standardized financial
statements Bloom’s: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
,4) Ratios that measure a firm’s ability to pay its bills over the short run without
undue stress are known as:
1. A) asset management ratios.
2. B) long-term solvency measures.
3. C) liquidity measures.
4. D) profitability ratios.
5. E) market value ratios.
Answer: C
Difficulty: 1 Easy
Section: 3.2 Ratio Analysis
Topic: Short-term solvency
ratios Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
5) The current ratio is measured as:
1. A) current assets minus current liabilities.
2. B) current assets divided by current liabilities.
3. C) current liabilities minus inventory, divided by current assets.
4. D) cash on hand divided by current liabilities.
5. E) current liabilities divided by current assets.
Answer: B
Difficulty: 1 Easy
Section: 3.2 Ratio Analysis
Topic: Short-term solvency
ratios Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
, 6) The quick ratio is measured as:
1. A) current assets divided by current liabilities.
2. B) cash on hand plus current liabilities, divided by current assets.
3. C) current liabilities divided by current assets, plus inventory.
4. D) current assets minus inventory, divided by current liabilities.
5. E) current assets minus inventory minus current liabilities.
Answer: D
Difficulty: 1 Easy
Section: 3.2 Ratio Analysis
Topic: Short-term solvency
ratios Bloom’s: Remember
AACSB: Reflective Thinking
Accessibility: Keyboard
Navigation
7) Ratios that measure a firm’s financial leverage are known as ratios.
1. A) asset management
2. B) long-term solvency
3. C) short-term solvency
4. D) profitability
5. E) market value
Answer: B
Difficulty: 1 Easy
Section: 3.2 Ratio Analysis
Topic: Long-term solvency
ratios
