Question 1

Holding all other variables constant,which of the following could cause a firm's current ratio to decrease from 3.0 to 2.5? An increase in

Accepted Answer

A) inventory. 
B) long-term debt. 
C) accounts receivable. 
D) accounts payable. 
A) inventory. 
B) long-term debt. 
C) accounts receivable. 
D) accounts payable.

Question 2

Which of the following statements is true?

Accepted Answer

A) As a general rule,management would want to reduce the firm's average collection period. 
B) As a general rule,management would want to reduce the firm's accounts receivable turnover ratio. 
C) As a general rule,management would want to increase the firm's average collection period. 
D) As a general rule,a firm is not financially affected by the amount of time required to collect its accounts receivable. 
A) As a general rule,management would want to reduce the firm's average collection period. 
B) As a general rule,management would want to reduce the firm's accounts receivable turnover ratio. 
C) As a general rule,management would want to increase the firm's average collection period. 
D) As a general rule,a firm is not financially affected by the amount of time required to collect its accounts receivable.

Question 3

________ indicates management's effectiveness in managing the firm's income statement.

Accepted Answer

A) Gross profit margin 
B) Operating profit margin 
C) Net profit margin 
D) Return on assets 
A) Gross profit margin 
B) Operating profit margin 
C) Net profit margin 
D) Return on assets

Question 4

In the times-interest-earned ratio,dividend payments are included in

Accepted Answer

A) the numerator. 
B) the denominator. 
C) both the numerator and the denominator. 
D) neither the numerator nor the denominator. 
A) the numerator. 
B) the denominator. 
C) both the numerator and the denominator. 
D) neither the numerator nor the denominator.

Question 5

Differences in accounting practices limit the use of ratio analysis.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is NOT a reason why financial analysts use ratio analysis?

Accepted Answer

A) Ratios help to pinpoint a firm's strengths. 
B) Ratios restate accounting data in relative terms. 
C) Ratios are ideal for smoothing out the differences that may exist when comparing firms that use different accounting practices. 
D) Some of a firm's weaknesses can be identified through the usage of ratios. 
A) Ratios help to pinpoint a firm's strengths. 
B) Ratios restate accounting data in relative terms. 
C) Ratios are ideal for smoothing out the differences that may exist when comparing firms that use different accounting practices. 
D) Some of a firm's weaknesses can be identified through the usage of ratios.

Question 7

Based on the information in Table 1,the debt ratio is

Accepted Answer

A) 0.70. 
B) 0.20. 
C) 0.74. 
D) 0.42. 
A) 0.70. 
B) 0.20. 
C) 0.74. 
D) 0.42.

Question 8

By using common size income statements,firms can determine how various expenses as a percentage of total sales changed from period to period.

Accepted Answer

A) True 
 B)False

Question 9

Ratios are used to standardize financial information.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following will help an analyst determine how well a firm is able to meet its debt obligations?

Accepted Answer

A) Total liability turnover 
B) Times-interest-earned 
C) Return on debt 
D) Asset ratio 
A) Total liability turnover 
B) Times-interest-earned 
C) Return on debt 
D) Asset ratio

Question 11

GAAP,Inc.has total assets of $2,575,000,sales of $5,950,000,total liabilities of $1,855,062,and a net profit margin of 2.9%.What is GAAP's return on equity? Round to the nearest 0.1%.

Accepted Answer

A) 8.6% 
B) 24.0% 
C) 16.4% 
D) 4.4% 
A) 8.6% 
B) 24.0% 
C) 16.4% 
D) 4.4%

Question 12

One weakness of the times-interest-earned ratio is that it includes only the annual interest expense as a finance expense that must be paid.

Accepted Answer

A) True 
 B)False

Question 13

The focus of DuPont Analysis is to provide management information as to how the firm is using its resources to maximize returns on owners' investments.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

An example of a liquidity ratio is the

Accepted Answer

A) quick ratio. 
B) debt ratio. 
C) times-interest-earned. 
D) return on assets. 
A) quick ratio. 
B) debt ratio. 
C) times-interest-earned. 
D) return on assets.

Question 16

Sputter Motors has sales of $3,450,000,total assets of $1,240,000,cost of goods sold of $2,550,000,and an inventory turnover of 6.38.What is the amount of Sputter's inventory?

Accepted Answer

A) $421,054 
B) $638,112 
C) $543,000 
D) $399,687 
A) $421,054 
B) $638,112 
C) $543,000 
D) $399,687

Question 17

A decrease in ________ will increase gross profit margin.

Accepted Answer

A) cost of goods sold 
B) depreciation expense 
C) interest expense 
D) both A and B 
A) cost of goods sold 
B) depreciation expense 
C) interest expense 
D) both A and B

Question 18

Another name for the acid test ratio is the

Accepted Answer

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

Question 19

Champion Company has sales of $20 million,total debt of $1.5 million,and a debt ratio of 40%.What is Champion's total asset turnover?

Accepted Answer

A) 13.33 
B) 9.11 
C) 6.55 
D) 5.33 
A) 13.33 
B) 9.11 
C) 6.55 
D) 5.33

Question 20

The analysis of a firm's financial statements is usually of interest only to people who do not work for the company.

Accepted Answer

A) True 
 B)False

Holding all other variables constant,which of the following could cause a firm's current ratio to decrease from 3.0 to 2.5? An increase in

Which of the following statements is true?

________ indicates management's effectiveness in managing the firm's income statement.

In the times-interest-earned ratio,dividend payments are included in

Differences in accounting practices limit the use of ratio analysis.

Which of the following is NOT a reason why financial analysts use ratio analysis?

Based on the information in Table 1,the debt ratio is

By using common size income statements,firms can determine how various expenses as a percentage of total sales changed from period to period.

Ratios are used to standardize financial information.

Which of the following will help an analyst determine how well a firm is able to meet its debt obligations?

GAAP,Inc.has total assets of $2,575,000,sales of $5,950,000,total liabilities of $1,855,062,and a net profit margin of 2.9%.What is GAAP's return on equity? Round to the nearest 0.1%.

One weakness of the times-interest-earned ratio is that it includes only the annual interest expense as a finance expense that must be paid.

The focus of DuPont Analysis is to provide management information as to how the firm is using its resources to maximize returns on owners' investments.

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

An example of a liquidity ratio is the

Sputter Motors has sales of $3,450,000,total assets of $1,240,000,cost of goods sold of $2,550,000,and an inventory turnover of 6.38.What is the amount of Sputter's inventory?

A decrease in ________ will increase gross profit margin.

Another name for the acid test ratio is the

Champion Company has sales of $20 million,total debt of $1.5 million,and a debt ratio of 40%.What is Champion's total asset turnover?

The analysis of a firm's financial statements is usually of interest only to people who do not work for the company.

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 4: Financial Analysis-Sizing up Firm Performance

Holding all other variables constant,which of the following could cause a firm's current ratio to decrease from 3.0 to 2.5? An increase in

Which of the following statements is true?

________ indicates management's effectiveness in managing the firm's income statement.

In the times-interest-earned ratio,dividend payments are included in

Differences in accounting practices limit the use of ratio analysis.

Which of the following is NOT a reason why financial analysts use ratio analysis?

Based on the information in Table 1,the debt ratio is

By using common size income statements,firms can determine how various expenses as a percentage of total sales changed from period to period.

Ratios are used to standardize financial information.

Which of the following will help an analyst determine how well a firm is able to meet its debt obligations?

GAAP,Inc.has total assets of $2,575,000,sales of $5,950,000,total liabilities of $1,855,062,and a net profit margin of 2.9%.What is GAAP's return on equity? Round to the nearest 0.1%.

One weakness of the times-interest-earned ratio is that it includes only the annual interest expense as a finance expense that must be paid.

The focus of DuPont Analysis is to provide management information as to how the firm is using its resources to maximize returns on owners' investments.

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

An example of a liquidity ratio is the

Sputter Motors has sales of $3,450,000,total assets of $1,240,000,cost of goods sold of $2,550,000,and an inventory turnover of 6.38.What is the amount of Sputter's inventory?

A decrease in ________ will increase gross profit margin.

Another name for the acid test ratio is the

Champion Company has sales of $20 million,total debt of $1.5 million,and a debt ratio of 40%.What is Champion's total asset turnover?

The analysis of a firm's financial statements is usually of interest only to people who do not work for the company.

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters