Question 1

Which of the following is the best indicator of management's effectiveness at managing the firm's balance sheet?

Accepted Answer

A)  Debt ratio 
B)  Total asset turnover 
C)  Times-interest-earned 
D)  Operating profit margin 
A)  Debt ratio 
B)  Total asset turnover 
C)  Times-interest-earned 
D)  Operating profit margin

Question 2

Individuals who do not work for a company rarely have enough information to perform a detailed financial analysis of the company.

Accepted Answer

A) True 
 B)False

Question 3

The principal reason for preparing common size statements is

Accepted Answer

A)  to make meaningful comparisons between firms that are not the same size. 
B)  to make meaningful comparisons between different quarters within the fiscal year. 
C)  to eliminate the effects of inflation. 
D)  to make meaningful comparisons between firms in different industries. 
A)  to make meaningful comparisons between firms that are not the same size. 
B)  to make meaningful comparisons between different quarters within the fiscal year. 
C)  to eliminate the effects of inflation. 
D)  to make meaningful comparisons between firms in different industries.

Question 4

Given an accounts receivable turnover of 8 and annual credit sales of $362,000, the average collection period (360-day year) is

Accepted Answer

A)  90 days. 
B)  45 days. 
C)  75 days. 
D)  60 days. 
A)  90 days. 
B)  45 days. 
C)  75 days. 
D)  60 days.

Question 5

Dew Point Dynamite, Inc. generated a 1.23 total asset turnover in its latest fiscal year on assets of $2,112,077. The firm has total liabilities of $950,997. The firm's net profit margin was 10.3%. What is Dew Point's return on equity? Round to the nearest 0.1%.

Accepted Answer

A)  23.1% 
B)  12.6% 
C)  5.5% 
D)  18.2% 
A)  23.1% 
B)  12.6% 
C)  5.5% 
D)  18.2%

Question 6

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 7

Common size balance sheets represent all figures on the balance sheet

Accepted Answer

A)  as a percentage change from the previous year. 
B)  percentages of the current year's sales. 
C)  as a percentage of peer group sales. 
D)  as a percentage of total assets. 
A)  as a percentage change from the previous year. 
B)  percentages of the current year's sales. 
C)  as a percentage of peer group sales. 
D)  as a percentage of total assets.

Question 8

Since 2015, ABC's inventory management has

Accepted Answer

A)  improved. 
B)  deteriorated. 
C)  remained the same. 
D)  changed but in an indeterminate manner. 
A)  improved. 
B)  deteriorated. 
C)  remained the same. 
D)  changed but in an indeterminate manner.

Question 9

Kannan Carpets, Inc. has asked you to calculate the company's quick ratio for 2016. All you have is a partial balance sheet and some assumptions. Using the information provided, calculate Kannan's quick ratio for 2016. Gross profit margin = 50%
Inventory turnover (COGS/Inv) = 5
2001 sales = $3,000
Assets Liabilities & Equity
Cash ? Accounts payable $50
AR $40 Accruals ?
Inventory ? Long-term debt $400
Net fixed assets $500 Equity 250
Total assets $900 Total liab. & equity ?

Accepted Answer

A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8 
A)  0.2 
B)  0.4 
C)  0.6 
D)  0.8

Question 10

Which of the following is the best indicator of management's effectiveness at generating profits relative to the firm's assets?

Accepted Answer

A)  Quick ratio 
B)  Fixed assets turnover 
C)  Return on assets 
D)  Accounts receivable turnover 
A)  Quick ratio 
B)  Fixed assets turnover 
C)  Return on assets 
D)  Accounts receivable turnover

Question 11

The analysis of a firm's financial statements can be an important factor in the firm's ability to borrow money.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

The DuPont method decomposes return on equity into

Accepted Answer

A)  return on assets and the debt ratio. 
B)  return on assets and the equity multiplier. 
C)  operating income and inventory turnover. 
D)  net profit margin and fixed asset turnover. 
A)  return on assets and the debt ratio. 
B)  return on assets and the equity multiplier. 
C)  operating income and inventory turnover. 
D)  net profit margin and fixed asset turnover.

Question 14

An increase in the current ratio would indicate an increase in

Accepted Answer

A)  leverage. 
B)  liquidity. 
C)  return on investment. 
D)  operating income. 
A)  leverage. 
B)  liquidity. 
C)  return on investment. 
D)  operating income.

Question 15

Financial ratios comprise the principal tool of financial analysis since they can be used to answer a variety of questions regarding a firm's financial condition.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is included in the denominator of the times-interest-earned ratio?

Accepted Answer

A)  Lease payments 
B)  Principal payments 
C)  Interest expense 
D)  Gross profit 
A)  Lease payments 
B)  Principal payments 
C)  Interest expense 
D)  Gross profit

Question 17

Which of the following industries has the highest average inventory turnover ratio?

Accepted Answer

A)  Retail clothing stores 
B)  Jewelry stores 
C)  Automobile dealerships 
D)  Supermarkets 
A)  Retail clothing stores 
B)  Jewelry stores 
C)  Automobile dealerships 
D)  Supermarkets

Question 18

Which of the following is NOT a driving force of the operating profit margin?

Accepted Answer

A)  The amount of leverage a firm uses. 
B)  Cost of goods sold 
C)  General and administrative expenses 
D)  The unit price of product sold 
A)  The amount of leverage a firm uses. 
B)  Cost of goods sold 
C)  General and administrative expenses 
D)  The unit price of product sold

Question 19

A general rule for interpreting financial ratios is: "the higher the better."

Accepted Answer

A) True 
 B)False

Question 20

Skrit Corporation has a net profit margin of 15% and a total asset turnover of 1.7. What is Skrit's return on total assets?

Accepted Answer

A)  12.3% 
B)  25.5% 
C)  8.8% 
D)  11.1% 
A)  12.3% 
B)  25.5% 
C)  8.8% 
D)  11.1%

Which of the following is the best indicator of management's effectiveness at managing the firm's balance sheet?

Individuals who do not work for a company rarely have enough information to perform a detailed financial analysis of the company.

The principal reason for preparing common size statements is

Given an accounts receivable turnover of 8 and annual credit sales of $362,000, the average collection period (360-day year) is

Dew Point Dynamite, Inc. generated a 1.23 total asset turnover in its latest fiscal year on assets of $2,112,077. The firm has total liabilities of $950,997. The firm's net profit margin was 10.3%. What is Dew Point's return on equity? Round to the nearest 0.1%.

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?

Common size balance sheets represent all figures on the balance sheet

Since 2015, ABC's inventory management has

Which of the following is the best indicator of management's effectiveness at generating profits relative to the firm's assets?

The analysis of a firm's financial statements can be an important factor in the firm's ability to borrow money.

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?

The DuPont method decomposes return on equity into

An increase in the current ratio would indicate an increase in

Financial ratios comprise the principal tool of financial analysis since they can be used to answer a variety of questions regarding a firm's financial condition.

Which of the following is included in the denominator of the times-interest-earned ratio?

Which of the following industries has the highest average inventory turnover ratio?

Which of the following is NOT a driving force of the operating profit margin?

A general rule for interpreting financial ratios is: "the higher the better."

Skrit Corporation has a net profit margin of 15% and a total asset turnover of 1.7. What is Skrit's return on total assets?

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

Which of the following is the best indicator of management's effectiveness at managing the firm's balance sheet?

Individuals who do not work for a company rarely have enough information to perform a detailed financial analysis of the company.

The principal reason for preparing common size statements is

Given an accounts receivable turnover of 8 and annual credit sales of $362,000, the average collection period (360-day year) is

Dew Point Dynamite, Inc. generated a 1.23 total asset turnover in its latest fiscal year on assets of $2,112,077. The firm has total liabilities of $950,997. The firm's net profit margin was 10.3%. What is Dew Point's return on equity? Round to the nearest 0.1%.

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?

Common size balance sheets represent all figures on the balance sheet

Since 2015, ABC's inventory management has

Which of the following is the best indicator of management's effectiveness at generating profits relative to the firm's assets?

The analysis of a firm's financial statements can be an important factor in the firm's ability to borrow money.

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?

The DuPont method decomposes return on equity into

An increase in the current ratio would indicate an increase in

Financial ratios comprise the principal tool of financial analysis since they can be used to answer a variety of questions regarding a firm's financial condition.

Which of the following is included in the denominator of the times-interest-earned ratio?

Which of the following industries has the highest average inventory turnover ratio?

Which of the following is NOT a driving force of the operating profit margin?

A general rule for interpreting financial ratios is: "the higher the better."

Skrit Corporation has a net profit margin of 15% and a total asset turnover of 1.7. What is Skrit's return on total assets?

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