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_________________________ concerns a firm's ability to make interest and principal payments on borrowings as they become due.

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The Johnson Company has a current ratio of 1.45.The company has just sold $600,000 worth of merchandise on credit.What will the current ratio be after the sales on credit?


A) greater than 1.45
B) 1.45
C) less than 1.45
D) unable to determine without more information

E) C) and D)
F) A) and B)

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Bragdon Company is consistently profitable.Its normal financial statement relationships are as follows:  Current ratid 3.5:1 Inventary tundver 4.5 tines  Liabilities to as5ets ratid 0.8:1\begin{array} { | l | l | } \hline \text { Current ratid } & 3.5 : 1 \\\hline \text { Inventary tundver } & 4.5 \text { tines } \\\hline \text { Liabilities to as5ets ratid } & 0.8 : 1 \\\hline\end{array} Required: Determine whether each transaction or event that follows increased,decreased or had no effect on each ratio. 1.Bragdon declared but did not pay a cash dividend. 2.Customers returned invoiced goods for which they had not paid. 3.Accounts payable were paid at year-end. 4.Bragdon recorded both a receivable from an insurance company and a loss on a building due to fire damage. 5.Early in the year,Bragdon increased the selling price of one of its products because customer demand far exceeded production capacity.The number of units sold this year was the same as last year.

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1.Bragdon declared but did not pay a cas...

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Bankruptcy prediction research has identified three broad factors influencing long-term solvency risk,which of the following is not one of the factors?


A) Investment factors
B) Financing factors
C) Operating factors
D) Credit factors

E) None of the above
F) C) and D)

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Working capital is defined as ______________________ minus _____________________.

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current as...

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Which of the following properly links the factors affecting a firm's ability to generate cash with its need to use cash in financing?  Ability to generate cash Need to use casha. Profitability of goods and services sold  Working capital requirementsb. Sales of existing plant assets  Plant capacity requirementsc. Borrowing capacity Debt service requirementsd. Profitability of goods and services sold  Debt service requirements\begin{array}{lll}& \underline {\text { Ability to generate cash}}&\underline {\text { Need to use cash}}\\a. &\text { Profitability of goods and services sold }& \text { Working capital requirements}\\b. &\text { Sales of existing plant assets }& \text { Plant capacity requirements}\\c. & \text { Borrowing capacity} & \text { Debt service requirements}\\d. & \text { Profitability of goods and services sold }& \text { Debt service requirements}\\\end{array}

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Mobile Company Mobile Company manufactures computer technology devices.Selected financial data for Mobile is presented below; use the information to answer the following questions:  current Assets  As of Dec. 31,2010 Dec. 31,2009 Cash and short-term investments $1,267,038$616,604 Accounts Receivable (net)  490,816665,828 Inventories 338,599487,505 Prepaid Expenses and other current assets 292,511\underlind291,915 Total Current Assets $2,388,964$2,061,852Current Liabilities  Short-term borrowings $25,190$38,108 Current portion of long-term debt 182,295210,090 Accounts payable 296,307334,247 Accrued liabilities 941,912743,999 Income taxes payable 203,049239,793 Total Current Liabilities 1.648753566237\begin{array}{lcc}\underline{\text { current Assets }}& \text { As of Dec. } 31,2010 &\text { Dec. } 31,2009\\\text { Cash and short-term investments } & \$ 1,267,038 & \$ 616,604 \\\text { Accounts Receivable (net) } & 490,816 & 665,828 \\\text { Inventories } & 338,599 & 487,505 \\\text { Prepaid Expenses and other current assets } &\underline{ 292,511} & \underlind{291,915}\\\text { Total Current Assets }&\$ 2,388,964 & \$ 2,061,852\\\\\text {Current Liabilities }\\\text { Short-term borrowings } & \$ 25,190 & \$ 38,108 \\\text { Current portion of long-term debt } & 182,295 & 210,090 \\\text { Accounts payable } & 296,307 & 334,247 \\\text { Accrued liabilities } & 941,912 & 743,999 \\\text { Income taxes payable } & \underline{203,049 }&\underline{ 239,793 }\\\text { Total Current Liabilities }&1.648753&566237\\\end{array}  Selected Income Statement Data - for the year ending December 31, 2010: \text { Selected Income Statement Data - for the year ending December 31, 2010: }  Net Sales $4,885,340 Cost of Goods Sold 2,542,35 Operating Income 733,54 Net Income 230,10\begin{array}{l}\begin{array}{l}\text { Net Sales } &\$ 4,885,340\\\text { Cost of Goods Sold }&2,542,35 \\\text { Operating Income } &733,54 \\\text { Net Income }&230,10\end{array}\\\begin{array}{r}\end{array}\end{array}  Selected Statement of Cash Flow Data - for the year ending December 31,2010:\text { Selected Statement of Cash Flow Data - for the year ending December } 31,2010:  Cash Flows from Operations $1.156,08\begin{array}{l}\begin{array}{l}\text { Cash Flows from Operations } &\$ 1.156,08\\\end{array}\\\begin{array}{r}\end{array}\end{array} -Refer to the information for Mobile Company.Mobile's current ratio in 2010 was:


A) 1.07
B) 1.45
C) 1
D) .69

E) A) and D)
F) B) and C)

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The source of risk related to political unrest and exchange rate changes are _________________________.

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On January 1,2012,Deputron Company's beginning inventory was $600,000.During 2012,the company purchased $2,600,000 of additional inventory,and on December 31,2012 Creek's ending inventory was $565,000. Required: What was Deputron's inventory turnover for 2012? 

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4.5 times.
Calculations: Cost of goods s...

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The current ratio is one of the measures of the __________ of the firm.

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Below is selected information from Marker's 2012 financial statements:  As of Dec.31, 2012 Dec. 31, 2011 Cash and short-term investments $958,245$745,800 Accounts Receivable (net)  125,850135,400 nventories 195,650175,840 Prepaid Expenses and other current assets 45,30030,860 Total CurrentAssets $1,325,045$1,087,900 Plant, Property and Equipment, net 1,478,3201,358,700 Intangible Assets 125,600120,400 Total Assets $2,928,965$2,567,000 Short-term borrowings $25,190$3,108 Current portion of long-term debt 45,00040,000 Accounts payable 285,400325,900 Accrued liabilities 916,722705,89 ncome taxes payable 125,400115,600 Total Current Liabilities $1,397,712$1,225,499 Long-term Debt 450,000430,000 Total Liabilities $1,847,712$1,655,499 Shareholders’ Equity $1,081,253$911,501 Total Liabilities and Shareholders’ Equity$2,928,965$2,567,000\begin{array}{lrr}&\text { As of Dec.31, } 2012&\text { Dec. 31, } 2011\\\text { Cash and short-term investments } & \$ 958,245 & \$ 745,800 \\\text { Accounts Receivable (net) } & 125,850 & 135,400 \\\text { nventories } & 195,650 & 175,840 \\\text { Prepaid Expenses and other current assets } & 45,300 & 30,860\\{\text { Total CurrentAssets }} & \$ 1,325,045 & \$ 1,087,900 \\\text { Plant, Property and Equipment, net } & 1,478,320 & 1,358,700 \\\text { Intangible Assets } & 125,600 & 120,400 \\\text { Total Assets }& \$ 2,928,965&\$ 2,567,000 \\\\ \\\text { Short-term borrowings } & \$ 25,190 & \$ 3,108 \\\text { Current portion of long-term debt } & 45,000 & 40,000 \\\text { Accounts payable } & 285,400 & 325,900 \\\text { Accrued liabilities } & 916,722 & 705,89 \\\text { ncome taxes payable } & 125,400 & 115,600\\\text { Total Current Liabilities } & \$ 1,397,712 & \$ 1,225,499 \\\text { Long-term Debt } & 450,000 & 430,000 \\\text { Total Liabilities } & \$ 1,847,712 & \$ 1,655,499 \\\text { Shareholders' Equity } & \$ 1,081,253 & \$ 911,501\\\text { Total Liabilities and Shareholders' Equity}&\$ 2,928,965 & \$ 2,567,000 \\\end{array}  Selected Income Statement Data - for the year ending December 31, 2012: \text { Selected Income Statement Data - for the year ending December 31, 2012: }  Net Sales  Cost of Goods Sold  Operating Income  Net Income $3,210,645(2,310,210) $900,435$324,850\begin{array}{l}\begin{array}{l}\text { Net Sales } \\\text { Cost of Goods Sold } \\\text { Operating Income }\\\text { Net Income }\end{array}\begin{array}{r}\$ 3,210,645 \\(2,310,210) \\\$ 900,435\\\$ 324,850\end{array}\end{array}  Selected Statement of Cash Flow Data - for the year ending December 31,2012 : \text { Selected Statement of Cash Flow Data - for the year ending December } 31,2012 \text { : } Cash Flows from Operations interest Expense Income Tax Expense$584,75042,400114,200\begin{array}{l}\begin{array}{lll}\text {Cash Flows from Operations }\\\text {interest Expense }\\\text {Income Tax Expense}\end{array}\begin{array}{lll}\$ 584,750 \\42,400 \\114,200\end{array}\end{array} -Marker's 2012 Interest Coverage ratio is:


A) 7.66
B) 1.00
C) 11.35
D) 4.35

E) C) and D)
F) A) and C)

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The beta coefficient measures the ____________________ of a firm's returns with those of all shares traded in the market (in excess of the risk-free interest rate).

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Which of the following ratios is not a measure of long-term solvency risk?


A) Debt /Equity Ratio
B) Interest Coverage Ratio
C) Operating Cash Flows to Current Liabilities Ratio
D) Liabilities to Assets Ratio

E) B) and C)
F) A) and B)

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Changes in interest rates can typically affect firms in all of the following ways except:


A) The value of investments in bonds or other investment securities with fixed interest
Rates.
B) The value of liabilities with fixed interest rates.
C) The returns a firm generates from pension fund investments.
D) The cash-equivalent value of assets invested abroad.

E) B) and D)
F) A) and B)

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One problem with debt ratios is that they provide no information about the ability of the firm to generate ________________________________________ to service debt.

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cash flow ...

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A.What are the three measures that are used to analyze long-term solvency risk? B.describe each measure briefly

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Answer part A:
1)Debt ratios
2)Interest ...

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Given the following information,calculate for Year 2 the number of days of working capital financing the firm will need to obtain from other sources?  Year 1  Yerar 2 Accounts Receivable, net 518562 Accounts Payable 203192 Inventary 535564 Credit Sales 3,2053,636 Cast af Gads Sald 2,0372,294 Selling and Adrin Estuense 1,0811,131\begin{array} { l c c c } & \text { Year 1 } & \text { Yerar } 2 \\\text { Accounts Receivable, net } & 518 & 562\\\text { Accounts Payable } &203&192\\\text { Inventary } &535 & 564 \\\\\text { Credit Sales } & 3,205 & 3,636\\\text { Cast af Gads Sald } & 2,037 & 2,294 \\\text { Selling and Adrin Estuense } & 1,081 & 1,131 \\\end{array}

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The student will need to calculate the n...

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Below is selected information from Marker's 2012 financial statements:  As of Dec.31, 2012 Dec. 31, 2011 Cash and short-term investments $958,245$745,800 Accounts Receivable (net)  125,850135,400 nventories 195,650175,840 Prepaid Expenses and other current assets 45,30030,860 Total CurrentAssets $1,325,045$1,087,900 Plant, Property and Equipment, net 1,478,3201,358,700 Intangible Assets 125,600120,400 Total Assets $2,928,965$2,567,000 Short-term borrowings $25,190$3,108 Current portion of long-term debt 45,00040,000 Accounts payable 285,400325,900 Accrued liabilities 916,722705,89 ncome taxes payable 125,400115,600 Total Current Liabilities $1,397,712$1,225,499 Long-term Debt 450,000430,000 Total Liabilities $1,847,712$1,655,499 Shareholders’ Equity $1,081,253$911,501 Total Liabilities and Shareholders’ Equity$2,928,965$2,567,000\begin{array}{lrr}&\text { As of Dec.31, } 2012&\text { Dec. 31, } 2011\\\text { Cash and short-term investments } & \$ 958,245 & \$ 745,800 \\\text { Accounts Receivable (net) } & 125,850 & 135,400 \\\text { nventories } & 195,650 & 175,840 \\\text { Prepaid Expenses and other current assets } & 45,300 & 30,860\\{\text { Total CurrentAssets }} & \$ 1,325,045 & \$ 1,087,900 \\\text { Plant, Property and Equipment, net } & 1,478,320 & 1,358,700 \\\text { Intangible Assets } & 125,600 & 120,400 \\\text { Total Assets }& \$ 2,928,965&\$ 2,567,000 \\\\ \\\text { Short-term borrowings } & \$ 25,190 & \$ 3,108 \\\text { Current portion of long-term debt } & 45,000 & 40,000 \\\text { Accounts payable } & 285,400 & 325,900 \\\text { Accrued liabilities } & 916,722 & 705,89 \\\text { ncome taxes payable } & 125,400 & 115,600\\\text { Total Current Liabilities } & \$ 1,397,712 & \$ 1,225,499 \\\text { Long-term Debt } & 450,000 & 430,000 \\\text { Total Liabilities } & \$ 1,847,712 & \$ 1,655,499 \\\text { Shareholders' Equity } & \$ 1,081,253 & \$ 911,501\\\text { Total Liabilities and Shareholders' Equity}&\$ 2,928,965 & \$ 2,567,000 \\\end{array}  Selected Income Statement Data - for the year ending December 31, 2012: \text { Selected Income Statement Data - for the year ending December 31, 2012: }  Net Sales  Cost of Goods Sold  Operating Income  Net Income $3,210,645(2,310,210) $900,435$324,850\begin{array}{l}\begin{array}{l}\text { Net Sales } \\\text { Cost of Goods Sold } \\\text { Operating Income }\\\text { Net Income }\end{array}\begin{array}{r}\$ 3,210,645 \\(2,310,210) \\\$ 900,435\\\$ 324,850\end{array}\end{array}  Selected Statement of Cash Flow Data - for the year ending December 31,2012 : \text { Selected Statement of Cash Flow Data - for the year ending December } 31,2012 \text { : } Cash Flows from Operations interest Expense Income Tax Expense$584,75042,400114,200\begin{array}{l}\begin{array}{lll}\text {Cash Flows from Operations }\\\text {interest Expense }\\\text {Income Tax Expense}\end{array}\begin{array}{lll}\$ 584,750 \\42,400 \\114,200\end{array}\end{array} -Marker's 2012 Long-term Debt to Long-Term Capital ratio is:


A) 31.4%
B) 29.4%
C) 34.0%
D) 25.4%

E) C) and D)
F) A) and C)

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When a company wants to calculate the current ratio they would divide the current assets by the ___________

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All of the following are common international risks faced by companies except:


A) asset expropriation
B) exchange rate changes
C) political unrest
D) dependence on one or a few suppliers

E) B) and C)
F) All of the above

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