ACC 599 Midterm Exam: Financial and Managerial Accounting Concepts
A midterm exam that tests both financial and managerial accounting concepts and their application in business.
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ACC 599 Midterm Exam: Financial and Managerial Accounting Concepts
Question 1
Dawn Alive reported the following for 2012.
Ending market price $40.75
Earnings per share:
Basic 2.50
Diluted 2.08
Dividends per share 1.10
The price/earnings ratio and dividend payout were:
Answer
19.59 and 52.88%
16.30 and 52.88%
16.30 and 44.00%
19.59 and 44.00%
37.04 and 52.88%
Question 2
The ratio percentage of earnings retained is the same as that termed:
Answer
dividend yield.
dividend payout.
this year's retained earnings to net income.
return on common equity.
book value.
Question 3
What is the effect of the exercise of stock options?
Answer
They generate cash to the issuing firm and therefore increase profit per share.
They are an expense at the time of exercise. This lowers net income.
They increase debt and lower borrowing capacity but have no effect on profit.
They increase the number of shares outstanding.
They have no immediate effect on profitability
Question 4
Interest expense creates magnification of earnings through financial leverage because:
Answer
the interest rate is variable.
interest accompanies debt financing.
the use of interest causes higher earnings.
interest costs are cheaper than the required rate of return to equity owners.
Question 1
Dawn Alive reported the following for 2012.
Ending market price $40.75
Earnings per share:
Basic 2.50
Diluted 2.08
Dividends per share 1.10
The price/earnings ratio and dividend payout were:
Answer
19.59 and 52.88%
16.30 and 52.88%
16.30 and 44.00%
19.59 and 44.00%
37.04 and 52.88%
Question 2
The ratio percentage of earnings retained is the same as that termed:
Answer
dividend yield.
dividend payout.
this year's retained earnings to net income.
return on common equity.
book value.
Question 3
What is the effect of the exercise of stock options?
Answer
They generate cash to the issuing firm and therefore increase profit per share.
They are an expense at the time of exercise. This lowers net income.
They increase debt and lower borrowing capacity but have no effect on profit.
They increase the number of shares outstanding.
They have no immediate effect on profitability
Question 4
Interest expense creates magnification of earnings through financial leverage because:
Answer
the interest rate is variable.
interest accompanies debt financing.
the use of interest causes higher earnings.
interest costs are cheaper than the required rate of return to equity owners.
while earnings available to pay interest rise, earnings to residual owners rise faster.
Question 5
Book value per share may not approximate market value per share because:
Answer
the book value is after tax.
book values are based on replacement costs rather than market values.
book value is related to book figures and market value is related to the future potential as seen by
investors.
investors do not understand book value.
book value is not related to dividends.
Question 6
The price/earnings ratio:
Answer
measures the past earning ability of the firm.
is a gauge of future earning power as seen by investors.
relates price to dividends.
relates price to total net income.
Question 7
Which of the following ratios appears most frequently in annual reports?
Answer
Earnings per Share
Return on Equity
Profit Margin
Effective Tax Rate
Debt/Equity
Question 8
Which of the following ratios is rated to be a primary measure of liquidity and the highest
significance rating of the liquidity ratios according to commercial loan departments?
Answer
Debt/Equity
Current Ratio
Degree of Financial Leverage
Inventory Turnover in Days
Accounts Receivable Turnover in Days
Question 9
Which of the following ratios is given the highest significance rating by controllers?
Answer
Current Ratio
Earning Per Share
Return on Equity - After Tax
Question 5
Book value per share may not approximate market value per share because:
Answer
the book value is after tax.
book values are based on replacement costs rather than market values.
book value is related to book figures and market value is related to the future potential as seen by
investors.
investors do not understand book value.
book value is not related to dividends.
Question 6
The price/earnings ratio:
Answer
measures the past earning ability of the firm.
is a gauge of future earning power as seen by investors.
relates price to dividends.
relates price to total net income.
Question 7
Which of the following ratios appears most frequently in annual reports?
Answer
Earnings per Share
Return on Equity
Profit Margin
Effective Tax Rate
Debt/Equity
Question 8
Which of the following ratios is rated to be a primary measure of liquidity and the highest
significance rating of the liquidity ratios according to commercial loan departments?
Answer
Debt/Equity
Current Ratio
Degree of Financial Leverage
Inventory Turnover in Days
Accounts Receivable Turnover in Days
Question 9
Which of the following ratios is given the highest significance rating by controllers?
Answer
Current Ratio
Earning Per Share
Return on Equity - After Tax
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Document Details
University
Kaplan University School of Business and Management
Subject
Accounting