Question 1

Assuming that Luther has no convertible bonds outstanding,then for the year ending December 31,2009 Luther's diluted earnings per share are closest to:
A) $1.01
B) $1.04
C) $1.28
D) $1.33

Accepted Answer

A) Diluted EPS = Net Income/(shares outstanding + options contracts outstanding + shares possible from convertible bonds outstanding) = 10.6/(10.2 + 0.3 + 0.0) = $1.01

Question 2

Which of the following is NOT a section on the cash flow statement?
A) Income generating activities
B) Investing activities
C) Operating activities
D) Financing activities

Accepted Answer

The correct sections on a cash flow statement are operating activities, investing activities, and financing activities. Income generating activities is not a recognized section on the cash flow statement.

Question 3

Which of the following is NOT an operating expense?
A) Interest expense
B) Depreciation and amortization
C) Selling, general and administrative expenses
D) Research and development

Accepted Answer

The answer of Which of the following is NOT an...

Question 4

Use the tables for the question(s) below.
Consider the following financial information:
   
-For the year ending December 31,2009 Luther's cash flow from operating activities is:

Accepted Answer

The answer of Use the tables for the question(s) below.
Consider...

Question 5

Use the information for the question(s) below.
In November 2009, Perrigo Co. (PRGO) had a share price of $39.20. They had 91.33 million shares outstanding, a market-to-book ratio of 3.76. In addition, PRGO had $845.01 million in outstanding debt, $163.82 million in net income, and cash of $257.09 million.
-The firm's revenues and expenses over a period of time are reported on the firm's:
A) income statement or statement of financial performance.
B) income statement or statement of financial position.
C) balance sheet or statement of financial performance.
D) balance sheet or statement of financial position.

Accepted Answer

Revenues and expenses are typically reported on the income statement, which is also known as the statement of financial performance.

Question 6

Use the tables for the question(s) below.
Consider the following financial information:
   
-For the year ending December 31,2009 Luther's cash flow from financing activities is:

Accepted Answer

The answer of Use the tables for the question(s) below.
Consider...

Question 7

Use the table for the question(s) below.
Consider the following balance sheet:
  
-If in 2009 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then what is Luther's Enterprise Value?
A) -$63.3 million
B) $353.1 million
C) $389.7 million
D) $516.9 million

Accepted Answer

C) Enterprise value = MVE + Debt - Cash = 10.2 × $16 + 290.1 - 63.6 = 389.7

Question 8

Use the table for the question(s) below.
Consider the following balance sheet:
  
-What is Luther's net working capital in 2008?
A) $12 million
B) $27 million
C) $39 million
D) $63.6 million

Accepted Answer

A) NWC = current assets - current liabilities = 144 - 132 = $12 million

Question 9

If on December 31,2008 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

Accepted Answer

The answer of If on December 31,2008 Luther has 8...

Question 10

Which of the following statements regarding net income transferred to retained earnings is correct?
A) Net income = net income transferred to retained earnings - dividends
B) Net income transferred to retain earnings = net income + dividends
C) Net income = net income transferred to retain earnings + dividends
D) Net income transferred to retain earnings - net income = dividends

Accepted Answer

Net income is the amount of profit earned by a company in a given period. This net income may be distributed as dividends to shareholders, or retained by the company for future growth opportunities. The amount of net income transferred to retained earnings is calculated as net income minus any dividends paid. Therefore, Choice C is the correct statement - net income = net income transferred to retained earnings + dividends.

Question 11

Gross profit is calculated as:
A) Total sales - cost of sales - selling, general and administrative expenses - depreciation and amortization
B) Total sales - cost of sales - selling, general and administrative expenses
C) Total sales - cost of sales
D) None of the above

Accepted Answer

Gross profit is calculated as total sales minus cost of sales, which includes only the direct costs associated with producing or acquiring the product or service being sold. It does not include any other expenses such as selling, general and administrative expenses or depreciation and amortization. Therefore, option C is the correct answer.

Question 12

Which of the following adjustments to net income is NOT correct if you are trying to calculate cash flow from operating activities?
A) Add increases in accounts payable
B) Add back depreciation
C) Add increases in accounts receivable
D) Deduct increases in inventory

Accepted Answer

The answer of Which of the following adjustments to net...

Question 13

Use the table for the question(s) below.
Consider the following balance sheet:
  
-If in 2009 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then Luther's Market-to-book ratio would be closest to:
A) 0.39
B) 0.76
C) 1.29
D) 2.57

Accepted Answer

C) MTB = market cap/book value of equity = (10.2 million × 16)/126.6 = 163.2/126.6 = 1.289

Question 14

Which of the following statements regarding the income statement is INCORRECT?
A) The income statement shows the earnings and expenses at a given point in time.
B) The income statement shows the flow of earnings and expenses generated by the firm between two dates.
C) The last or "bottom" line of the income statement shows the firm's net income.
D) The first line of an income statement lists the revenues from the sales of products or services.

Accepted Answer

The income statement shows the earnings and expenses over a period of time, typically a month, quarter, or year, rather than at a given point in time.

Question 15

Use the table for the question(s) below.
Consider the following income statement and other information:
 
-For the year ending December 31,2009 Luther's earnings per share are closest to:
A) $0.96
B) $1.04
C) $1.28
D) $1.33

Accepted Answer

B) EPS = Net Income/Shares Outstanding = $10.6/10.2 = $1.04

Question 16

Which of the following adjustments is NOT correct if you are trying to calculate cash flow from financing activities?
A) Add dividends paid
B) Add any increase in long term borrowing
C) Add any increase in short-term borrowing
D) Add proceeds from the sale of stock

Accepted Answer

The answer of Which of the following adjustments is NOT...

Question 17

Use the information for the question(s) below.
In November 2009, Perrigo Co. (PRGO) had a share price of $39.20. They had 91.33 million shares outstanding, a market-to-book ratio of 3.76. In addition, PRGO had $845.01 million in outstanding debt, $163.82 million in net income, and cash of $257.09 million.
-Perrigo's earnings per share (EPS)is closest to:
A) $0.19
B) $1.79
C) $2.81
D) $3.76

Accepted Answer

B) EPS = (Net Income)/(Shares Outstanding) = $163.82/91.33 = 1.7937

Question 18

Which of the following is NOT a reason why cash flow may not equal net income?
A) Amortization is added in when calculating net income.
B) Changes in inventory will change cash flows but not income.
C) Capital expenditures are not recorded on the income statement.
D) Depreciation is deducted when calculating net income.

Accepted Answer

Amortization may decrease net income but it is added back in when calculating cash flow. The other options listed are all reasons why cash flow may vary from net income.

Question 19

Use the information for the question(s) below.
In November 2009, Perrigo Co. (PRGO) had a share price of $39.20. They had 91.33 million shares outstanding, a market-to-book ratio of 3.76. In addition, PRGO had $845.01 million in outstanding debt, $163.82 million in net income, and cash of $257.09 million.
-The statement of financial performance is also known as the:
A) balance sheet.
B) income statement.
C) statement of cash flows.
D) statement of stockholder's equity.

Accepted Answer

The statement of financial performance is also known as the income statement, which shows a company's revenues, expenses, and net income for a specific period of time.

Question 20

If on December 31,2008 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's enterprise value?

Accepted Answer

The answer of If on December 31,2008 Luther has 8...

Quiz 2: Introduction to Financial Statement Analysis

Assuming that Luther has no convertible bonds outstanding,then for the year ending December 31,2009 Luther's diluted earnings per share are closest to:

Which of the following is NOT a section on the cash flow statement?

Which of the following is NOT an operating expense?

Use the tables for the question(s) below. Consider the following financial information: -For the year ending December 31,2009 Luther's cash flow from operating activities is:

Use the tables for the question(s) below. Consider the following financial information: -For the year ending December 31,2009 Luther's cash flow from financing activities is:

Use the table for the question(s) below. Consider the following balance sheet: -If in 2009 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then what is Luther's Enterprise Value?

Use the table for the question(s) below. Consider the following balance sheet: -What is Luther's net working capital in 2008?

If on December 31,2008 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's market-to-book ratio?

Which of the following statements regarding net income transferred to retained earnings is correct?

Gross profit is calculated as:

Which of the following adjustments to net income is NOT correct if you are trying to calculate cash flow from operating activities?

Use the table for the question(s) below. Consider the following balance sheet: -If in 2009 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share,then Luther's Market-to-book ratio would be closest to:

Which of the following statements regarding the income statement is INCORRECT?

Use the table for the question(s) below. Consider the following income statement and other information: -For the year ending December 31,2009 Luther's earnings per share are closest to:

Which of the following adjustments is NOT correct if you are trying to calculate cash flow from financing activities?

Which of the following is NOT a reason why cash flow may not equal net income?

If on December 31,2008 Luther has 8 million shares outstanding trading at $15 per share,then what is Luther's enterprise value?