Question

On a common size balance sheet, Accounts Receivable is expressed as a percentage of what

value?

A) Revenue

B) Total Assets

C) Inventory

D) Total Liabilities

E) Cash

Which would most likely cause a profitable company to run out of cash?
A) Declining revenues
B) Increase in receivables and inventory
C) High leverage ratios
D) Significant depreciation expense as % of sales
E) Revenue growing faster than net income

Company X has 20M shares outstanding at $20 per share. Management has announced a 2 for 1 stock split. What would be the new market cap of the company X?

A) $100M
B) $50M
C) $800M
D) $200M
E) $400M

15. Which is true about dividends?

A) High growth companies typically pay high dividends
B) Dividends are considered cash flows from operations
C) Dividends are paid on a recurring basis
D) Paying dividends are considered cash flows from investing
E) When a company issues a dividend, its stock price will increase by the amount of dividend

16. Given the following information, which is true?
Company 1 – Current Ratio: 2.1x, Times Interest Earned: 3.2x, Inventory Turnover: 5.0x
Company 2 – Current Ratio: 0.7x, Times Interest Earned: 1.3x, Inventory Turnover: 4.2x
Company 3 – Current Ratio: 1.3x, Times Interest Earned: 5.2x, Inventory Turnover: 3.1x

A) Company 3 is more liquid than Company 1
B) Company 2 is the most liquid firm
C) Lenders would view Company 3 as higher risk of default than company 2
D) Company 2 has the highest probability of defaulting on its debt
E) Company 1 is the least efficient at managing inventory

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