Question 1

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

Accepted Answer

A)  the firm has higher sales than the industry average. 
B)  the firm is selling a product mix that includes more high margin items. 
C)  the firm is managing its inventory inefficiently. 
D)  the firm's products are in inventory for fewer days before they are sold than is average for the industry. 
A)  the firm has higher sales than the industry average. 
B)  the firm is selling a product mix that includes more high margin items. 
C)  the firm is managing its inventory inefficiently. 
D)  the firm's products are in inventory for fewer days before they are sold than is average for the industry.

Question 2

Please refer to Table 4-4 for the following questions.
Table 4-4
Wes Donnell, Inc.
Balance Sheet
   Wes Donnell, Inc.
Income Statement
For the year ended December 31, 2010
  
-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 retained earnings balance for 2010?

Accepted Answer

A)  $10,000 
B)  $8,000 
C)  $19,600 
D)  $2,600 
A)  $10,000 
B)  $8,000 
C)  $19,600 
D)  $2,600

Question 3

Baker Corp.is required by a debt agreement to maintain a current ratio of at least 2.5,and Baker's current ratio now is 3.Baker wants to purchase additional inventory for its upcoming Christmas season,and will pay for the inventory with short-term debt.How much inventory can Baker purchase without violating its debt agreement if their total current assets equal $15 million?

Accepted Answer

A)  $0.50 million 
B)  $1.67 million 
C)  $4.50 million 
D)  $6.00 million 
A)  $0.50 million 
B)  $1.67 million 
C)  $4.50 million 
D)  $6.00 million

Question 4

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 5

Price and Domann Inc.has an average collection period of 74 days.What is the accounts receivable turnover ratio for Price and Domann?

Accepted Answer

A)  4.93 
B)  2.47 
C)  2.66 
D)  1.74 
A)  4.93 
B)  2.47 
C)  2.66 
D)  1.74

Question 6

Please refer to Table 4-5 for the following questions.
Table 4-5
Yen Inc.
Balance Sheet
   Yen Inc.
Income Statement
For the year ended December 31, 2010
  
-Based on the information contained in Tables 4-5,what was Yen's quick ratio at the end of 2010?

Accepted Answer

A)  2.10 
B)  1.43 
C)  2.93 
D)  1.79 
A)  2.10 
B)  1.43 
C)  2.93 
D)  1.79

Question 7

Seasonality is introduced into financial ratios by averaging monthly account balances,and thus it is recommended that ending account balances be used.

Accepted Answer

A) True 
 B)False

Question 8

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

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

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

Price and Domann Inc.has an average collection period of 74 days.What is the accounts receivable turnover ratio for Price and Domann?

Please refer to Table 4-5 for the following questions. Table 4-5 Yen Inc. Balance Sheet Yen Inc. Income Statement For the year ended December 31, 2010 -Based on the information contained in Tables 4-5,what was Yen's quick ratio at the end of 2010?

Seasonality is introduced into financial ratios by averaging monthly account balances,and thus it is recommended that ending account balances be used.

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.

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

Current Asset Management

International Business Finance

Filters

Exam 4: Evaluating a Firms Financial Performance

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

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

Price and Domann Inc.has an average collection period of 74 days.What is the accounts receivable turnover ratio for Price and Domann?

Please refer to Table 4-5 for the following questions. Table 4-5 Yen Inc. Balance Sheet Yen Inc. Income Statement For the year ended December 31, 2010 -Based on the information contained in Tables 4-5,what was Yen's quick ratio at the end of 2010?

Seasonality is introduced into financial ratios by averaging monthly account balances,and thus it is recommended that ending account balances be used.

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.

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

Current Asset Management

International Business Finance

Filters