Financial m&mManagerial mAccountingmformMBAs, m5th mEditio
nmbymEaston, mHalsey, mMcAnally, mHartgravesm &mMorse
PracticemQuiz mSolutions
Modulem1m–mFinancial mAccountingmformMBAs
1. Whichmof mthemf ollowing morganizations mdoes mnot mcontributemto mthemf ormationmof mGAAP?
a. FASB m(FinancialmAccounting mStandards mBoard)
b. IRSm(InternalmRevenuemService)
c. AICPA m(AmericanmInstitutemof mCertif ied mPublic mAccountants)
d. SECm(Securities mand mExchangemCommissio
n)mAnswer: mb
2. Rocky mBeachmreports mthemf ollowing mdollarmbalances minmits mretained mearnings maccount.
($mmillions) 2017 2016
Retained mearnings…………. 8,968.1 8,223.9
During m2017, mRocky mBeachmreported mnetmincomemof m$1,351.4mmillion. m What mamount mof mdividends, mi
f many, mdid mRocky mBeachmpay mto mits mshareholders minm2017?
a. $607.2mmillion
b. No mdividends mpaid
c. $301.2mmillion
d. $744.2mmillio
nmAnswer: ma
Computationmof mdividends
Beginning mretained mearnings, m2017m............................................................................ $8,223.9
+ Net mincomem................................................................................................................. 1,351.4
– Cashmdividends........................................................................................................... (?)
= Ending mretained mearnings, m2017m................................................................................. $8,968.1
Thus, mdividends mwerem$607.2mmillionmf orm2017.
CambridgemBusinessmPublishers,m©201
PracticemQuiz mSolutions,mModule 8
m1 1-1
,3. At mthembeginning mof mamrecent myear, mThemWaltmDisneymCompany’s mliabilities mequaled m$26,197mmil
lion. mDuring mthemyear, massets mincreased mby m$400mmillionmand myear-
end massets mequaled m$50,388mmillion. mLiabilities mdecreased m$100mmillionmduring mthemyear.
What mwerembeginning mand mending mamounts mf ormWalt mDisney’s mequity?
a. $26,197mmillionmbeginning mequity mand m$24,291mmillionmending mequity
b. $23,791mmillionmbeginning mequity mand m$27,042mmillionmending mequity
c. $23,791mmillionmbeginning mequity mand m$24,291mmillionmending mequity
d. $27,042mmillionmbeginning mequity mand m$25,183mmillionmending mequ
ity mAnswer: mc
Using mthemaccounting mequationmat mthembeginningmof mthemyear:
Assets($50,388m-m$400) = mLiabilities($26,197)m+ mEquity(?)
Thus: mBeginningmEquity = m$23,791
Using mthemaccounting mequationmat mthemendmof mthemyear:
Assets($50,388) = mLiabilities($26,197m-m$100)m+ mEquity(?)
Thus: mEndingmEquity = m$24,291
4. Assumemthat mStarbucksmreported mnet mincomemf ormamrecent myearmof m$564mmillion. m Its mstockhol
ders’mequity mis m$2,229mmillionmand m$2,090mmillion, mrespectively.
Computemits mreturnmonmequity.
a. 13.0%
b. 22.8%
c. 26.1%
d. 32.7%
Answer: mc
ROEm m = mNetmincomem/mAveragemstockholders’mequity
= m$564mmillionm/ m[($2,229mmillionm+ m$2,090mmillion)m/m2]m= m26.1%
5. Nokiammanuf actures, mmarkets, mand msells mphones mand mothermelectronics. mAssumemthat mNokiamrepo
rted mnetmincomemof m€3,582monmsales mof m€34,191mand mtotalmstockholders’mequitymofm€14,576mand m€14,
871, mrespectively.
What mis mNokia’s mreturnmonmequity?
a. 24.3%
b. 42.3%
c. 17.7%
d. 10.5%
Answer: ma
Returnmonmequity mis mnet mincomemdivided mby mthemaveragemtotalmstockholders’mequity. mN
okia’s mROE: m €3,582m/m[(€14,576m+ m€14,871)m/m2] m= m24.3%.
CambridgemBusinessmPublishers,m©201
8m1-2 Financialm&mManagerialmAccounting mformMBAs,m5thmEdit
ion
,6. Themtotalmassets mof mDell, mInc. mequalm$15,470mmillionmand mits mequity mis m$4,873mmillion. m What mi
s mthemamount mof mitsmliabilities, mand mwhat mpercentagemof mfinancing mis mprovidedmby mDell’s mowne
rs?
a. $20,343mmillion, m24.0%
b. $10,597mmillion, m31.50%
c. $10,597mmillion, m68.5%
d. $20,343mmillion, m76.0%
Answer: mb
m($mmillion
Assets = Liabilities + Equity
s) $15,470 $10,597 $4,873
Dellmreceives mmoremof mits mf inancing mf rommnonowners m($10,597mmillion)mversus mowners m($4,873mmilli
on). mIts mownermf inancing mcomprises m31.5% mof mits mtotalmf inancing m($4,873mmillion/ m$15,470mmillion).
7. Themtotalmassets mof mFordmMotormCompanymequalm$315,920mmillionmand mits mliabilities mequalm$304
,269mmillion. m What mis mthemamount mof mFord’s mequity mand mwhat mpercentagemofmfinancing mis mprovide
d mby mits mowners?
a. $m 11,651mmillion, m 3.9%
b. $620,189mmillion, m49.1%
c. $620,189mmillion, m50.9%
d. $m 11,651mmillion, m 3.7%
Answer: md
m($mmillion
Assets = Liabilities + Equity
s) $315,920 $304,269 $11,651
Ford mreceives mmoremof mits mf inancing mf rommnonowners m($304,269mmillion)mversus mowners m($11,651m
million). mIts mownermf inancing mcomprises m3.7% mofmits mtotalmf inancing m($11,651mmillion/ m$315,920mmilli
on). mThemrelatively mlowmlevelmof mequity mcapitalmismprimarily mthemresult mofmthemf actmthat mFord mismactuall
y mamblend mof mtwo mcompanies: mthemautomotivemmanuf acturing mcompany mand mthemfinancialmsubsidiary.
mThemf inancial msubsidiary mhas mambalancemsheet msimilarmto mthat mof mambank, mthat mis, mrelatively mlittlemeq
uity mcapital. mThemblend mof mthesemtwo moperating mentities mresults minmambalancemsheet mthat mis mmoremde
pendent monmborrowed mf unds mthanmwould mbemthemcasemif mFord mconsisted msolely mof mthemmanuf acturin
g mcompany.
CambridgemBusinessmPublishers,m©201
PracticemQuiz mSolutions,mModule 8
m1 1-3
, 8. Following maremselected mratios mof mCanary mCorp. mf orm2017mand m2016.
ReturnmonmAssets m(ROA)mComponent 2017 2016
Profitabilitym(Netmincome/Sales)m …………… 26% 22%
Productivitym(Sales/Average mnetmassets)m ……. 1.2 1.1
Computemthemcompany’s mreturnmonmassets m(ROA)mf orm2017.
a. 30.0%
b. 19.2%
c. 12.1%
d. 31.2%
Answer: md
ROAm= mProf it mmarginmmasset mturnover. m2017mROAm= m26% mm1.2m= m31.2%.
9. NicklemCompany mreports mnet mincomemofm$800mmillionmformits mf iscalmyearmended mJanuary m2017. m At
mthembeginning mof mthat mfiscalmyear, mNicklemCompany mhad m$5,000mmillionminmtotalmassets.m By mf iscal
myear-end m2017, mtotalmassets mhad mgrownmto m$6,500mmillion.
What mis mNickle’s mreturnmonmassets m(ROA)?
a. 13.9%
b. 16.0%
c. 12.3%
d. 10.7%
Answer: m a
Returnmonmassets m(ROA) = Net mincomem/mAveragemasset
s
= $800m/ m[($5,000m+ m$6,500)m/ m
2]
= 13.9%
10. Themf ollowing mtablemcontains mf inancialmstatement minf ormationmf ormIzzy mCorporation.
($ mmillions) TotalmAssets NetmIncome Sales Equity
2016m ………………………….. $105,000 $10,000 $95,000 $30,000
2017m ………………………….. $125,000 $11,000 $100,000 $31,000
Computemthemreturnmonmequity m(ROE)mand mreturnmonmassets m(ROA)mf orm2017.
a. 25.5% mROE, m10.0% mROA
b. 31.9% mROE, m11.2% mROA
c. 36.1% mROE, m9.6% mROA
d. 37.2% mROE, m13.1% mROA
Answer: m c
2017mROEm= m$11,000m/ m[($31,000+$30,000)m/m2] m= m36.1%
CambridgemBusinessmPublishers,m©201
8m1-4 Financialm&mManagerialmAccounting mformMBAs,m5thmEdit
ion
nmbymEaston, mHalsey, mMcAnally, mHartgravesm &mMorse
PracticemQuiz mSolutions
Modulem1m–mFinancial mAccountingmformMBAs
1. Whichmof mthemf ollowing morganizations mdoes mnot mcontributemto mthemf ormationmof mGAAP?
a. FASB m(FinancialmAccounting mStandards mBoard)
b. IRSm(InternalmRevenuemService)
c. AICPA m(AmericanmInstitutemof mCertif ied mPublic mAccountants)
d. SECm(Securities mand mExchangemCommissio
n)mAnswer: mb
2. Rocky mBeachmreports mthemf ollowing mdollarmbalances minmits mretained mearnings maccount.
($mmillions) 2017 2016
Retained mearnings…………. 8,968.1 8,223.9
During m2017, mRocky mBeachmreported mnetmincomemof m$1,351.4mmillion. m What mamount mof mdividends, mi
f many, mdid mRocky mBeachmpay mto mits mshareholders minm2017?
a. $607.2mmillion
b. No mdividends mpaid
c. $301.2mmillion
d. $744.2mmillio
nmAnswer: ma
Computationmof mdividends
Beginning mretained mearnings, m2017m............................................................................ $8,223.9
+ Net mincomem................................................................................................................. 1,351.4
– Cashmdividends........................................................................................................... (?)
= Ending mretained mearnings, m2017m................................................................................. $8,968.1
Thus, mdividends mwerem$607.2mmillionmf orm2017.
CambridgemBusinessmPublishers,m©201
PracticemQuiz mSolutions,mModule 8
m1 1-1
,3. At mthembeginning mof mamrecent myear, mThemWaltmDisneymCompany’s mliabilities mequaled m$26,197mmil
lion. mDuring mthemyear, massets mincreased mby m$400mmillionmand myear-
end massets mequaled m$50,388mmillion. mLiabilities mdecreased m$100mmillionmduring mthemyear.
What mwerembeginning mand mending mamounts mf ormWalt mDisney’s mequity?
a. $26,197mmillionmbeginning mequity mand m$24,291mmillionmending mequity
b. $23,791mmillionmbeginning mequity mand m$27,042mmillionmending mequity
c. $23,791mmillionmbeginning mequity mand m$24,291mmillionmending mequity
d. $27,042mmillionmbeginning mequity mand m$25,183mmillionmending mequ
ity mAnswer: mc
Using mthemaccounting mequationmat mthembeginningmof mthemyear:
Assets($50,388m-m$400) = mLiabilities($26,197)m+ mEquity(?)
Thus: mBeginningmEquity = m$23,791
Using mthemaccounting mequationmat mthemendmof mthemyear:
Assets($50,388) = mLiabilities($26,197m-m$100)m+ mEquity(?)
Thus: mEndingmEquity = m$24,291
4. Assumemthat mStarbucksmreported mnet mincomemf ormamrecent myearmof m$564mmillion. m Its mstockhol
ders’mequity mis m$2,229mmillionmand m$2,090mmillion, mrespectively.
Computemits mreturnmonmequity.
a. 13.0%
b. 22.8%
c. 26.1%
d. 32.7%
Answer: mc
ROEm m = mNetmincomem/mAveragemstockholders’mequity
= m$564mmillionm/ m[($2,229mmillionm+ m$2,090mmillion)m/m2]m= m26.1%
5. Nokiammanuf actures, mmarkets, mand msells mphones mand mothermelectronics. mAssumemthat mNokiamrepo
rted mnetmincomemof m€3,582monmsales mof m€34,191mand mtotalmstockholders’mequitymofm€14,576mand m€14,
871, mrespectively.
What mis mNokia’s mreturnmonmequity?
a. 24.3%
b. 42.3%
c. 17.7%
d. 10.5%
Answer: ma
Returnmonmequity mis mnet mincomemdivided mby mthemaveragemtotalmstockholders’mequity. mN
okia’s mROE: m €3,582m/m[(€14,576m+ m€14,871)m/m2] m= m24.3%.
CambridgemBusinessmPublishers,m©201
8m1-2 Financialm&mManagerialmAccounting mformMBAs,m5thmEdit
ion
,6. Themtotalmassets mof mDell, mInc. mequalm$15,470mmillionmand mits mequity mis m$4,873mmillion. m What mi
s mthemamount mof mitsmliabilities, mand mwhat mpercentagemof mfinancing mis mprovidedmby mDell’s mowne
rs?
a. $20,343mmillion, m24.0%
b. $10,597mmillion, m31.50%
c. $10,597mmillion, m68.5%
d. $20,343mmillion, m76.0%
Answer: mb
m($mmillion
Assets = Liabilities + Equity
s) $15,470 $10,597 $4,873
Dellmreceives mmoremof mits mf inancing mf rommnonowners m($10,597mmillion)mversus mowners m($4,873mmilli
on). mIts mownermf inancing mcomprises m31.5% mof mits mtotalmf inancing m($4,873mmillion/ m$15,470mmillion).
7. Themtotalmassets mof mFordmMotormCompanymequalm$315,920mmillionmand mits mliabilities mequalm$304
,269mmillion. m What mis mthemamount mof mFord’s mequity mand mwhat mpercentagemofmfinancing mis mprovide
d mby mits mowners?
a. $m 11,651mmillion, m 3.9%
b. $620,189mmillion, m49.1%
c. $620,189mmillion, m50.9%
d. $m 11,651mmillion, m 3.7%
Answer: md
m($mmillion
Assets = Liabilities + Equity
s) $315,920 $304,269 $11,651
Ford mreceives mmoremof mits mf inancing mf rommnonowners m($304,269mmillion)mversus mowners m($11,651m
million). mIts mownermf inancing mcomprises m3.7% mofmits mtotalmf inancing m($11,651mmillion/ m$315,920mmilli
on). mThemrelatively mlowmlevelmof mequity mcapitalmismprimarily mthemresult mofmthemf actmthat mFord mismactuall
y mamblend mof mtwo mcompanies: mthemautomotivemmanuf acturing mcompany mand mthemfinancialmsubsidiary.
mThemf inancial msubsidiary mhas mambalancemsheet msimilarmto mthat mof mambank, mthat mis, mrelatively mlittlemeq
uity mcapital. mThemblend mof mthesemtwo moperating mentities mresults minmambalancemsheet mthat mis mmoremde
pendent monmborrowed mf unds mthanmwould mbemthemcasemif mFord mconsisted msolely mof mthemmanuf acturin
g mcompany.
CambridgemBusinessmPublishers,m©201
PracticemQuiz mSolutions,mModule 8
m1 1-3
, 8. Following maremselected mratios mof mCanary mCorp. mf orm2017mand m2016.
ReturnmonmAssets m(ROA)mComponent 2017 2016
Profitabilitym(Netmincome/Sales)m …………… 26% 22%
Productivitym(Sales/Average mnetmassets)m ……. 1.2 1.1
Computemthemcompany’s mreturnmonmassets m(ROA)mf orm2017.
a. 30.0%
b. 19.2%
c. 12.1%
d. 31.2%
Answer: md
ROAm= mProf it mmarginmmasset mturnover. m2017mROAm= m26% mm1.2m= m31.2%.
9. NicklemCompany mreports mnet mincomemofm$800mmillionmformits mf iscalmyearmended mJanuary m2017. m At
mthembeginning mof mthat mfiscalmyear, mNicklemCompany mhad m$5,000mmillionminmtotalmassets.m By mf iscal
myear-end m2017, mtotalmassets mhad mgrownmto m$6,500mmillion.
What mis mNickle’s mreturnmonmassets m(ROA)?
a. 13.9%
b. 16.0%
c. 12.3%
d. 10.7%
Answer: m a
Returnmonmassets m(ROA) = Net mincomem/mAveragemasset
s
= $800m/ m[($5,000m+ m$6,500)m/ m
2]
= 13.9%
10. Themf ollowing mtablemcontains mf inancialmstatement minf ormationmf ormIzzy mCorporation.
($ mmillions) TotalmAssets NetmIncome Sales Equity
2016m ………………………….. $105,000 $10,000 $95,000 $30,000
2017m ………………………….. $125,000 $11,000 $100,000 $31,000
Computemthemreturnmonmequity m(ROE)mand mreturnmonmassets m(ROA)mf orm2017.
a. 25.5% mROE, m10.0% mROA
b. 31.9% mROE, m11.2% mROA
c. 36.1% mROE, m9.6% mROA
d. 37.2% mROE, m13.1% mROA
Answer: m c
2017mROEm= m$11,000m/ m[($31,000+$30,000)m/m2] m= m36.1%
CambridgemBusinessmPublishers,m©201
8m1-4 Financialm&mManagerialmAccounting mformMBAs,m5thmEdit
ion
