Question 1

A financial technique that involves dividing various financial statement numbers into one another is called:

Accepted Answer

A)  trend analysis 
B)  cross sectional analysis 
C)  ratio analysis 
D)  percent of sales analysis 
A)  trend analysis 
B)  cross sectional analysis 
C)  ratio analysis 
D)  percent of sales analysis

Question 2

The operating profit margin is calculated as the firm's net income divided by net sales.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following ratios is not a component in the return on equity using DuPont analysis?

Accepted Answer

A)  asset turnover 
B)  profit margin 
C)  equity multiplier 
D)  current ratio 
A)  asset turnover 
B)  profit margin 
C)  equity multiplier 
D)  current ratio

Question 4

Potential creditors of a firm might analyze financial statements to gauge the firm's ability to make timely payments of interest and principal.

Accepted Answer

A) True 
 B)False

Question 5

Internally generated funds for financing new asset investments come from common stock issues.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements about liquidity ratios is true?

Accepted Answer

A)  The lower the quick ratio relative to the current ratio, the safer a firm is in terms of liquidity. 
B)  The higher the current ratio, the more likely a firm is able to pay its short-term obligations. 
C)  The quick ratio is always between 0 and 1. 
D)  Higher leverage reduces the quick ratio. 
A)  The lower the quick ratio relative to the current ratio, the safer a firm is in terms of liquidity. 
B)  The higher the current ratio, the more likely a firm is able to pay its short-term obligations. 
C)  The quick ratio is always between 0 and 1. 
D)  Higher leverage reduces the quick ratio.

Question 7

Ratios standardize balance sheet and income statement numbers, thus minimizing the effect of firm size.

Accepted Answer

A) True 
 B)False

Question 8

The current ratio is a measure of a company's ability to pay off its short-term debt as it comes due.

Accepted Answer

A) True 
 B)False

Question 9

Using the DuPont system of analysis and holding other factors constant, an increase in the net profit margin will result in ________ in the return on equity.

Accepted Answer

A)  an increase 
B)  a decrease 
C)  no change 
D)  an undetermined change 
A)  an increase 
B)  a decrease 
C)  no change 
D)  an undetermined change

Question 10

Typically, assets and liabilities with maturities of one _____ or less are considered to be current for financial statement purposes.

Accepted Answer

A)  week 
B)  month 
C)  quarter 
D)  year 
A)  week 
B)  month 
C)  quarter 
D)  year

Question 11

A firm with total asset turnover lower than the industry average may have

Accepted Answer

A)  excessive debt. 
B)  excessive cost of goods sold. 
C)  lower sales. 
D)  insufficient fixed assets. 
A)  excessive debt. 
B)  excessive cost of goods sold. 
C)  lower sales. 
D)  insufficient fixed assets.

Question 12

Cost-volume-profit analysis can be used to estimate the firm's operating profits at different levels of:

Accepted Answer

A)  dollar sales 
B)  unit sales 
C)  dollar fixed costs 
D)  unit variable costs 
A)  dollar sales 
B)  unit sales 
C)  dollar fixed costs 
D)  unit variable costs

Question 13

Market value ratios are one of the five basic categories of ratios.

Accepted Answer

A) True 
 B)False

Question 14

An analyst should be careful when conducting ratio analysis to ensure that

Accepted Answer

A)  the overall performance of the firm is judged on a single ratio. 
B)  the dates of the financial statements being compared are close in date. 
C)  unaudited statements are being used. 
D)  the same accounting procedures were used. 
A)  the overall performance of the firm is judged on a single ratio. 
B)  the dates of the financial statements being compared are close in date. 
C)  unaudited statements are being used. 
D)  the same accounting procedures were used.

Question 15

A firm's efficiency in utilizing resources at its disposal in generating sales would be measured by profitability ratios.

Accepted Answer

A) True 
 B)False

Question 16

Management of current assets does not involve which one of the following areas?

Accepted Answer

A)  cash and marketable securities 
B)  accounts receivable 
C)  inventory 
D)  plant and equipment 
A)  cash and marketable securities 
B)  accounts receivable 
C)  inventory 
D)  plant and equipment

Question 17

(Net income ∕ Net sales)

Accepted Answer

A)  Operating profit margin 
B)  Net profit margin 
C)  Operating return on assets 
D)  Return on total assets 
E)  Return on equity 
A)  Operating profit margin 
B)  Net profit margin 
C)  Operating return on assets 
D)  Return on total assets 
E)  Return on equity

Question 18

The quick ratio and the acid test ratio are the same thing.

Accepted Answer

A) True 
 B)False

Question 19

The method of calculating return on assets which highlights the importance of sales, profit margin, and asset turnover is known as:

Accepted Answer

A)  the Gordon model 
B)  cost-volume profit analysis 
C)  DuPont analysis 
D)  break-even analysis 
A)  the Gordon model 
B)  cost-volume profit analysis 
C)  DuPont analysis 
D)  break-even analysis

Question 20

Which one of the following types of ratios indicates the ability to meet short-term obligations to creditors as they come due?

Accepted Answer

A)  liquidity ratios 
B)  asset management ratios 
C)  capital structure ratios 
D)  profitability ratios 
A)  liquidity ratios 
B)  asset management ratios 
C)  capital structure ratios 
D)  profitability ratios

A financial technique that involves dividing various financial statement numbers into one another is called:

The operating profit margin is calculated as the firm's net income divided by net sales.

Which of the following ratios is not a component in the return on equity using DuPont analysis?

Potential creditors of a firm might analyze financial statements to gauge the firm's ability to make timely payments of interest and principal.

Internally generated funds for financing new asset investments come from common stock issues.

Which of the following statements about liquidity ratios is true?

Ratios standardize balance sheet and income statement numbers, thus minimizing the effect of firm size.

The current ratio is a measure of a company's ability to pay off its short-term debt as it comes due.

Using the DuPont system of analysis and holding other factors constant, an increase in the net profit margin will result in ________ in the return on equity.

Typically, assets and liabilities with maturities of one _____ or less are considered to be current for financial statement purposes.

A firm with total asset turnover lower than the industry average may have

Cost-volume-profit analysis can be used to estimate the firm's operating profits at different levels of:

Market value ratios are one of the five basic categories of ratios.

An analyst should be careful when conducting ratio analysis to ensure that

A firm's efficiency in utilizing resources at its disposal in generating sales would be measured by profitability ratios.

Management of current assets does not involve which one of the following areas?

(Net income ∕ Net sales)

The quick ratio and the acid test ratio are the same thing.

The method of calculating return on assets which highlights the importance of sales, profit margin, and asset turnover is known as:

Which one of the following types of ratios indicates the ability to meet short-term obligations to creditors as they come due?

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 14: Financial Analysis and Long-Term Financial Planning

A financial technique that involves dividing various financial statement numbers into one another is called:

The operating profit margin is calculated as the firm's net income divided by net sales.

Which of the following ratios is not a component in the return on equity using DuPont analysis?

Potential creditors of a firm might analyze financial statements to gauge the firm's ability to make timely payments of interest and principal.

Internally generated funds for financing new asset investments come from common stock issues.

Which of the following statements about liquidity ratios is true?

Ratios standardize balance sheet and income statement numbers, thus minimizing the effect of firm size.

The current ratio is a measure of a company's ability to pay off its short-term debt as it comes due.

Using the DuPont system of analysis and holding other factors constant, an increase in the net profit margin will result in ________ in the return on equity.

Typically, assets and liabilities with maturities of one _____ or less are considered to be current for financial statement purposes.

A firm with total asset turnover lower than the industry average may have

Cost-volume-profit analysis can be used to estimate the firm's operating profits at different levels of:

Market value ratios are one of the five basic categories of ratios.

An analyst should be careful when conducting ratio analysis to ensure that

A firm's efficiency in utilizing resources at its disposal in generating sales would be measured by profitability ratios.

Management of current assets does not involve which one of the following areas?

(Net income ∕ Net sales)

The quick ratio and the acid test ratio are the same thing.

The method of calculating return on assets which highlights the importance of sales, profit margin, and asset turnover is known as:

Which one of the following types of ratios indicates the ability to meet short-term obligations to creditors as they come due?

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters