11.Samson Company has about 5% of its total assets in current assets with the remainder invested in fixed assets. Based only on this information, one would expect this firm to have a
a.high level of operating leverage
b.high level of financial leverage
c.low level of operating leverage
d.low level of financial leverage
12.If Beverly Company has higher operating leverage than Hope, Inc., an equivalent increase in sales for both companies should result in
a.a greater increase in operating income for Beverly than Hope
b.a greater increase in operating income for Hope than Beverly
c.the same increase in operating income for Beverly and Hope
d.an increase in operating income for Hope but a decrease for Beverly
13.For which of these firms would you expect to find the least amount of operating leverage?
a.Federal Express
b.Boeing
c.Wal-mart
d.General Motors
14.Given below is information about four firms:
WhiteBlueRedBrown
Current assets$2500$4,000$1,400$2,400
Fixed assets9,5002,0001,400600
Liabilities5,0003,0001,4002,000
Equity7,0003,0001,4001,000
Which of these firms is most likely to have the highest operating leverage?
a.White
b.Blue
c.Red
d.Brown
15.It is quite likely that a company is experiencing (achieving) growth when its records reflect
a.capital expenditures during a period
b.straight-line depreciation during a period
c.straight-line depreciation in excess of capital expenditures during a period
d.capital expenditures in excess of straight-line depreciation during a period
16.Super Speed Company reports the following selected information as of December 31 for each of the past five years. (All amounts are in millions of dollars and 2011 is the most recent year.)
20112010200920082007
Total assets150147151161168
Net income45546
Dividends23223
Retained earnings5250484543
Which of the following is the most reasonable explanation for the trends above?
a.the company's products are "leading edge" involving new technologies
b.management is having a hard time finding the cash necessary to pay dividends
c.new competition is driving down prices and profitability
d.the firm is not taking advantage of opportunities for geographic and/or product line growth
17.Magenta Company and Green Company each began operations the same day with similar assets. Magenta Company purchased the assets while Green Company leased the assets on a yearly basis. Which of the following is TRUE?
a.both companies will report the same amount for assets on the balance sheet
b.both companies will report the same cash flow from investing activities
c.Green Company will have greater operating leverage
d.Magenta Company will report a greater amount of assets on the balance sheet
18.Snowy, Inc. and White Slopes, Inc. are similar in size and in many other respects. The companies reported the following net cash flow from (used for) investing activities in their annual reports.
($ in millions)200920082007
Snowy, Inc.(250)(300)(80)
White Slopes, Inc.40054(30)
From this information, you would expect
a.Snowy, Inc. to be growing more rapidly than White Slopes, Inc.
b.White Slopes, Inc. to be growing more rapidly than Snowy, Inc.
c.White Slopes, Inc. to have many more investment alternatives than Snowy, Inc.
d.White Slopes, Inc. to be less profitable than Snowy, Inc.
19.Which of the following net cash flow patterns is typical of a company with high growth potential and strong financial performance?
Cash flow from Cash flow from
operating activities investing activities
a.outflow outflow
b.outflow inflow
c.inflow inflow
d.inflow outflow
20.Return on assets is computed as
a.net income / total assets
b.operating income / total assets
c.sales / total assets
d.gross profit / total assets