Exam 4: Evaluating a Firms Financial Performance

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

All of the following measure liquidity EXCEPT

Williams Inc.has a current ratio equal to 3,a quick ratio equal to 1.8,and total current assets of $6 million.Williams' inventory balance is

Standard Inc.has an annual interest expense of $40,000.If Standard's times-interest-earned ratio is 3.0,what is Standard's Earnings Before Taxes (EBT)?

The computation of return on equity,or ROE,does not include retained earnings as part of common equity because retained earnings includes all net income for the company since its inception and analysts are trying to calculate the return for just the current year.

Financial ratios are often reported by industry or line of business because differences in the type of business can make ratio comparisons uninformative or even misleading.

An inventory turnover ratio of 7.2 compared to an industry average of 5.1 is likely to indicate that

Please refer to Table 4-3 for the following questions. Table 4-3 Emery Corporation -Based on the information in Table 4-3,the average collection period is

It is commonly accepted that the industry average for a ratio is the ideal goal for a financial manager to achieve.

Common-sized balance sheets

Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet -Based on the information in Table 4-2,the times interest earned ratio is

Ratios that examine profit relative to investment are useful in evaluating the overall effectiveness of the firm's management.

Operating profits or EBIT is used to measure a firm's profits on assets because it does not include the firm's cost of debt financing.

The current ratio of a firm would equal its quick ratio whenever

Please refer to Table 4-1 for the following questions. Table 4-1 Stewart Company Balance Sheet -Based on the information in Table 4-1,the inventory turnover ratio is

Which of the following is true if a firm wishes to collect its accounts faster by imposing stricter credit terms on its customers?

Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet -Based on the information in Table 4-2,the average collection period is

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

Denver Systems has total assets of $1,000,000; common equity of $400,000; a gross profit of $800,000; total operating expenses of $620,000; interest expense of $20,000; income taxes of $74,000; and preferred dividends of $30,000.What is Denver Systems' return on equity?

Total asset turnover is equal to accounts receivable turnover plus inventory turnover plus fixed asset turnover.