Question 1

When comparing inventory turnover ratios,other things being equal,

Accepted Answer

A)  a lower inventory turnover is preferred in order to keep inventory costs low. 
B)  a higher inventory turnover is preferred to improve liquidity. 
C)  higher inventory turnover results from old or obsolete inventory increasing the inventory balance on the balance sheet. 
D)  higher inventory turnover results from an increase in the selling price of the product. 
A)  a lower inventory turnover is preferred in order to keep inventory costs low. 
B)  a higher inventory turnover is preferred to improve liquidity. 
C)  higher inventory turnover results from old or obsolete inventory increasing the inventory balance on the balance sheet. 
D)  higher inventory turnover results from an increase in the selling price of the product.

Question 2

Please refer to Table 4-3 for the following questions.
Table 4-3
Emery Corporation
Balance Sheet Income Statement
  
-Based on the information in Table 4-3,the current and acid-test ratios are,respectively,

Accepted Answer

A)  2.37 and 1.39. 
B)  2.37 and 1.27. 
C)  2.18 and 1.39. 
D)  2.18 and 1.27. 
A)  2.37 and 1.39. 
B)  2.37 and 1.27. 
C)  2.18 and 1.39. 
D)  2.18 and 1.27.

Question 3

The goal of most financial managers is to reduce the amount of long-term debt to zero,thus maximizing shareholder wealth.

Accepted Answer

A) True 
 B)False

Question 4

Financial ratios that are higher than industry averages may indicate problems that are as detrimental to the firm as ratios that are too low.

Accepted Answer

A) True 
 B)False

Question 5

One weakness of the times interest earned ratio is that it includes only the annual interest expense as a finance expense and ignores other financing items such as lease payments that must be paid.

Accepted Answer

A) True 
 B)False

Question 6

The current ratio of a firm would be increased by which of the following?

Accepted Answer

A)  Land held for investment is sold for cash. 
B)  Equipment is purchased, financed by a long-term debt issue. 
C)  Inventories are sold for cash. 
D)  Inventories are sold on a credit basis. 
A)  Land held for investment is sold for cash. 
B)  Equipment is purchased, financed by a long-term debt issue. 
C)  Inventories are sold for cash. 
D)  Inventories are sold on a credit basis.

Question 7

Which of the following ratios would be the best way to determine how customers are paying for their purchases?

Accepted Answer

A)  inventory turnover 
B)  total asset turnover 
C)  current ratio 
D)  average collection period 
A)  inventory turnover 
B)  total asset turnover 
C)  current ratio 
D)  average collection period

Question 8

Jeter Industries has an accounts receivable turnover ratio of 4.5.If Jeter has an accounts receivable balance of $100,000,what is Jeter's average daily credit sales?

Accepted Answer

A)  $745.23 
B)  $1,232.88 
C)  $22,222.22 
D)  $1,893.45 
A)  $745.23 
B)  $1,232.88 
C)  $22,222.22 
D)  $1,893.45

Question 9

WPM,Inc.has current assets of $8,000,000,current liabilities of $4,000,000,inventory of $1,320,000,and sales of $12,000,000.What is the acid test ratio?

Accepted Answer

A)  2.0 
B)  1.67 
C)  0.22 
D)  0.1 
A)  2.0 
B)  1.67 
C)  0.22 
D)  0.1

Question 10

Financial ratios cannot be used to evaluate the creation of shareholder wealth because they are based on accounting numbers that reflect historical cost and not current market values.

Accepted Answer

A) True 
 B)False

Question 11

How managers choose to finance the business does not affect the rate of return to shareholders because the rate of return is based on how the company uses the assets it has,not whether or not they paid for the assets with debt or equity.

Accepted Answer

A) True 
 B)False

Question 12

Discuss five limitations to ratio analysis.

Accepted Answer

There are six limitations discussed in t

Question 13

How could an analyst determine whether a company's ratio is good or bad?

Accepted Answer

Two common benchmarks provide comparison

Question 14

Which of the following does NOT provide an indication of liquidity?

Accepted Answer

A)  quick ratio 
B)  debt ratio 
C)  inventory turnover 
D)  average collection period 
A)  quick ratio 
B)  debt ratio 
C)  inventory turnover 
D)  average collection period

Question 15

All of the following will improve a firm's liquidity position EXCEPT

Accepted Answer

A)  increase accounts receivable turnover. 
B)  increase inventory turnover. 
C)  increase the average collection period. 
D)  increase long-term debt and invest the money in marketable securities. 
A)  increase accounts receivable turnover. 
B)  increase inventory turnover. 
C)  increase the average collection period. 
D)  increase long-term debt and invest the money in marketable securities.

Question 16

Please refer to Table 4-4 for the following questions.
Table 4-4
Wes Donnell, Inc.
Balance Sheet
  
-In addition to the information contained in Table 4-4,you know that the current ratio for 2010 is 4 and that the corporation paid $11,600 in dividends in 2010.What is Wes Donnell's total asset balance for 2010?

Accepted Answer

A)  $42,500 
B)  $36,500 
C)  $38,500 
D)  $26,900 
A)  $42,500 
B)  $36,500 
C)  $38,500 
D)  $26,900

Question 17

Ratios are used to standardize financial information,thereby making it easier to interpret.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following ratios would be the poorest indicator of how rapidly the firm's credit accounts are being collected?

Accepted Answer

A)  times interest earned 
B)  average collection period 
C)  accounts receivable turnover ratio 
D)  cash conversion cycle 
A)  times interest earned 
B)  average collection period 
C)  accounts receivable turnover ratio 
D)  cash conversion cycle

Question 19

How does a firm use financial ratios? Who else might use financial ratios and why?

Accepted Answer

Financial analysis is not just a tool fo

Question 20

A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?

Accepted Answer

A)  liquidity 
B)  leverage 
C)  efficiency 
D)  profitability 
A)  liquidity 
B)  leverage 
C)  efficiency 
D)  profitability

When comparing inventory turnover ratios,other things being equal,

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation Balance Sheet Income Statement -Based on the information in Table 4-3,the current and acid-test ratios are,respectively,

The goal of most financial managers is to reduce the amount of long-term debt to zero,thus maximizing shareholder wealth.

Financial ratios that are higher than industry averages may indicate problems that are as detrimental to the firm as ratios that are too low.

One weakness of the times interest earned ratio is that it includes only the annual interest expense as a finance expense and ignores other financing items such as lease payments that must be paid.

The current ratio of a firm would be increased by which of the following?

Which of the following ratios would be the best way to determine how customers are paying for their purchases?

Jeter Industries has an accounts receivable turnover ratio of 4.5.If Jeter has an accounts receivable balance of $100,000,what is Jeter's average daily credit sales?

WPM,Inc.has current assets of $8,000,000,current liabilities of $4,000,000,inventory of $1,320,000,and sales of $12,000,000.What is the acid test ratio?

Financial ratios cannot be used to evaluate the creation of shareholder wealth because they are based on accounting numbers that reflect historical cost and not current market values.

How managers choose to finance the business does not affect the rate of return to shareholders because the rate of return is based on how the company uses the assets it has,not whether or not they paid for the assets with debt or equity.

Discuss five limitations to ratio analysis.

How could an analyst determine whether a company's ratio is good or bad?

Which of the following does NOT provide an indication of liquidity?

All of the following will improve a firm's liquidity position EXCEPT

Ratios are used to standardize financial information,thereby making it easier to interpret.

Which of the following ratios would be the poorest indicator of how rapidly the firm's credit accounts are being collected?

How does a firm use financial ratios? Who else might use financial ratios and why?

A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

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Exam 4: Evaluating a Firms Financial Performance

When comparing inventory turnover ratios,other things being equal,

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation Balance Sheet Income Statement -Based on the information in Table 4-3,the current and acid-test ratios are,respectively,

The goal of most financial managers is to reduce the amount of long-term debt to zero,thus maximizing shareholder wealth.

Financial ratios that are higher than industry averages may indicate problems that are as detrimental to the firm as ratios that are too low.

One weakness of the times interest earned ratio is that it includes only the annual interest expense as a finance expense and ignores other financing items such as lease payments that must be paid.

The current ratio of a firm would be increased by which of the following?

Which of the following ratios would be the best way to determine how customers are paying for their purchases?

Jeter Industries has an accounts receivable turnover ratio of 4.5.If Jeter has an accounts receivable balance of $100,000,what is Jeter's average daily credit sales?

WPM,Inc.has current assets of $8,000,000,current liabilities of $4,000,000,inventory of $1,320,000,and sales of $12,000,000.What is the acid test ratio?

Financial ratios cannot be used to evaluate the creation of shareholder wealth because they are based on accounting numbers that reflect historical cost and not current market values.

How managers choose to finance the business does not affect the rate of return to shareholders because the rate of return is based on how the company uses the assets it has,not whether or not they paid for the assets with debt or equity.

Discuss five limitations to ratio analysis.

How could an analyst determine whether a company's ratio is good or bad?

Which of the following does NOT provide an indication of liquidity?

All of the following will improve a firm's liquidity position EXCEPT

Ratios are used to standardize financial information,thereby making it easier to interpret.

Which of the following ratios would be the poorest indicator of how rapidly the firm's credit accounts are being collected?

How does a firm use financial ratios? Who else might use financial ratios and why?

A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters