Exam 4: Evaluating a Firms Financial Performance

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.

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 current ratio is

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,and assuming the company's stock price is $30 per share,the P/E ratio is

Which of the following has the most significant influence on return on equity?

Borrowing money causes a corporation's return on operating assets to decrease because of the interest that must be paid.

Assume that a firm issues a six-month note to purchase inventory.Which of the following is true if the current ratio before the purchase is 1.0?

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

All of the following measure liquidity except:

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

The acid-test ratio of a firm would be unaffected by which of the following?

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.

Financial ratios are used by managers inside the company and by lenders,credit-rating agencies,and investors outside of the company.

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

Complete the following balance sheet using the information given.Round account balances to the nearest dollar.

Nelson Industries has a higher debt ratio than Butler,Inc.,and Nelson also has a higher times interest earned ratio than Butler.If Nelson and Butler both have the same amount of total assets,then

Gemini Corp.reported the following balance sheet: Gemini Corp.'s debt ratio is

Asset efficiency ratios for Fischer,Inc.are given in the table below.Based on this information,Fischer,Inc.'s fixed asset turnover ratio is likely to be ________.

An analyst is evaluating two companies,A and B.Company A has a debt ratio of 50% and Company B has a debt ratio of 25%.In his report,the analyst is concerned about Company B's debt level,but not about Company A's debt level.Which of the following would best explain this position?

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

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