Question 1

Since 2015, ABC's liquidity has

Accepted Answer

A)   improved.
B)   deteriorated.
C)   remained the same.
D)   been variable across components of the liquidity measures.E) None of the above
F) B) and C)

Question 2

If the total asset turnover decreases, then the return on equity will

Accepted Answer

A)   decrease.
B)   increase.
C)   not change.
D)   change, but in an indeterminate way.E) C) and D)
F) A) and B)

Question 3

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.E) C) and D)
F) B) and C)

Question 4

Which of the following parties would be interested in an analysis of the firm's financial statements?

Accepted Answer

A)   investors
B)   creditors
C)   the firm's managers
D)   all of the aboveE) A) and D)
F) None of the above

Question 5

Kiosk Corp. has current assets of $4.5 million and current liabilities of $3.6 million. The current ratio is 1.25, and the quick ratio is 0.75. How much does Kiosk have invested in inventory (in millions) ?

Accepted Answer

A)   $0.8
B)   $1.8
C)   $2.4
D)   $2.9
E)   $3.6F) A) and D)
G) A) and B)

Question 6

In 2016, ABC's fixed asset turnover is

Accepted Answer

A)   2.78.
B)   5.0.
C)   4.6.
D)   4.8.E) A) and D)
F) A) and C)

Question 7

An increase in ________ will decrease the times-interest-earned ratio.

Accepted Answer

A)   the tax rate
B)   gross profit
C)   interest expense
D)   common stockE) None of the above
F) B) and D)

Question 8

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

Accepted Answer

A)   Net income
B)   Net Operating Income
C)   Interest expense
D)   Gross profitE) A) and C)
F) None of the above

Question 9

Discuss the limitations of ratio analysis.

Accepted Answer

It is often difficult to find adequate b...

Question 10

In 2016, the improvement in ABC's return on equity occurred because

Accepted Answer

A)   ABC used more debt than in 1994.
B)   ABC lowered its expenses in 1995 and was, therefore, more profitable.
C)   ABC utilized its total assets more efficiently in 1995.
D)   None of the above explain the improvement in ABC's return on equity.E) All of the above
F) B) and C)

Question 11

Based on the information in Table 1, the average collection period is

Accepted Answer

A)   71 days.
B)   84 days.
C)   64 days.
D)   127 days.E) A) and D)
F) A) and B)

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

Kannan Carpets, Inc. has asked you to calculate the company's current ratio for 2016. All you have is a partial balance sheet and some assumptions. Using the information provided, calculate Kannan's current ratio for 2001. Gross profit margin = 50%
Inventory turnover (COGS/Inv)  = 5
2016 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)   0.3
B)   0.8
C)   1.6
D)   2.2E) None of the above
F) A) and B)

Question 14

Which of the following financial ratios is the best measure of the operating effectiveness of a firm's management?

Accepted Answer

A)   Current ratio
B)   Gross profit margin
C)   Quick ratio
D)   Return on investmentE) C) and D)
F) B) and D)

Question 15

Ortny Industries has an accounts receivable turnover ratio of 4.3. If Ortny has an accounts receivable balance of $90,000, what is Ortny's average daily credit sales?

Accepted Answer

A)   $387,000
B)   $1,548
C)   $1,060
D)   $3,521E) All of the above
F) C) and D)

Question 16

Assume that a particular firm has a total asset turnover ratio lower than the industry norm. In addition, this firm's current ratio and acid test ratio also meet industry standards. Based on this information, we can conclude that this firm must have excessive

Accepted Answer

A)   accounts receivable.
B)   fixed assets.
C)   debt.
D)   inventory.E) All of the above
F) B) and D)

Question 17

What is the reason for computing the acid test ratio in addition to the current ratio?

Accepted Answer

A)   inventory is the most liquid of the liquid assets.
B)   a firm's inventory may not be particularly liquid.
C)   inventory is the best collateral for short term loans.
D)   compared to accounts receivable, inventory balances may be difficult to verifyE) All of the above
F) C) and D)

Question 18

Which of the following comparisons are used to assess a company's current performance?

Accepted Answer

A)   Industry average comparisons.
B)   Same company ratios from recent past years.
C)   Comparisons with a selected company or group of companies having similar characteristics.
D)   All of the above.E) All of the above
F) A) and C)

Question 19

Smith Corporation has current assets of $11,400, inventories of $4,000, and a current ratio of 2.6. What is Smith's quick or acid test ratio?

Accepted Answer

A)   1.69
B)   0.54
C)   0.74
D)   1.35E) A) and B)
F) A) and C)

Question 20

Spinnit, Limited has a debt ratio of .57, current liabilities of $14,000, and total assets of $70,000. What is the level of Spinnit, Limited's total liabilities?

Accepted Answer

A)   $25,900
B)   $24,600
C)   $39,900
D)   $53,900E) None of the above
F) B) and C)

Exam 4: Financial Analysis-Sizing up Firm Performance

Which of the following financial ratios is the best measure of the operating effectiveness of a firm's management?

Correct Answer
verified

An increase in ________ will decrease the times-interest-earned ratio.

Correct Answer
verified

What is the reason for computing the acid test ratio in addition to the current ratio?

Correct Answer
verified

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.

Correct Answer
verified

Since 2015, ABC's liquidity has

Correct Answer
verified

Discuss the limitations of ratio analysis.

Correct Answer
verified
It is often difficult to find adequate b...
View Answer

Assume that a particular firm has a total asset turnover ratio lower than the industry norm. In addition, this firm's current ratio and acid test ratio also meet industry standards. Based on this information, we can conclude that this firm must have excessive

Correct Answer
verified

Based on the information in Table 1, the average collection period is

Correct Answer
verified

Spinnit, Limited has a debt ratio of .57, current liabilities of $14,000, and total assets of $70,000. What is the level of Spinnit, Limited's total liabilities?

Correct Answer
verified

Kiosk Corp. has current assets of $4.5 million and current liabilities of $3.6 million. The current ratio is 1.25, and the quick ratio is 0.75. How much does Kiosk have invested in inventory (in millions) ?

Correct Answer
verified

Ortny Industries has an accounts receivable turnover ratio of 4.3. If Ortny has an accounts receivable balance of $90,000, what is Ortny's average daily credit sales?

Correct Answer
verified

Which of the following comparisons are used to assess a company's current performance?

Correct Answer
verified

Which of the following parties would be interested in an analysis of the firm's financial statements?

Correct Answer
verified

Smith Corporation has current assets of $11,400, inventories of $4,000, and a current ratio of 2.6. What is Smith's quick or acid test ratio?

Correct Answer
verified

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

Correct Answer
verified

If the total asset turnover decreases, then the return on equity will

Correct Answer
verified

In 2016, ABC's fixed asset turnover is

Correct Answer
verified

Correct Answer
verified

In 2016, the improvement in ABC's return on equity occurred because

Correct Answer
verified

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

Correct Answer
verified

Exam 4: Financial Analysis-Sizing up Firm Performance

Which of the following financial ratios is the best measure of the operating effectiveness of a firm's management?

Correct AnswerverifiedShow Answer

An increase in ________ will decrease the times-interest-earned ratio.

Correct AnswerverifiedShow Answer

What is the reason for computing the acid test ratio in addition to the current ratio?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Since 2015, ABC's liquidity has

Correct AnswerverifiedShow Answer

Discuss the limitations of ratio analysis.

Correct AnswerverifiedIt is often difficult to find adequate b...View AnswerShow Answer

Assume that a particular firm has a total asset turnover ratio lower than the industry norm. In addition, this firm's current ratio and acid test ratio also meet industry standards. Based on this information, we can conclude that this firm must have excessive

Correct AnswerverifiedShow Answer

Based on the information in Table 1, the average collection period is

Correct AnswerverifiedShow Answer

Spinnit, Limited has a debt ratio of .57, current liabilities of $14,000, and total assets of $70,000. What is the level of Spinnit, Limited's total liabilities?

Correct AnswerverifiedShow Answer

Kiosk Corp. has current assets of $4.5 million and current liabilities of $3.6 million. The current ratio is 1.25, and the quick ratio is 0.75. How much does Kiosk have invested in inventory (in millions) ?

Correct AnswerverifiedShow Answer

Ortny Industries has an accounts receivable turnover ratio of 4.3. If Ortny has an accounts receivable balance of $90,000, what is Ortny's average daily credit sales?

Correct AnswerverifiedShow Answer

Which of the following comparisons are used to assess a company's current performance?

Correct AnswerverifiedShow Answer

Which of the following parties would be interested in an analysis of the firm's financial statements?

Correct AnswerverifiedShow Answer

Smith Corporation has current assets of $11,400, inventories of $4,000, and a current ratio of 2.6. What is Smith's quick or acid test ratio?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the total asset turnover decreases, then the return on equity will

Correct AnswerverifiedShow Answer

In 2016, ABC's fixed asset turnover is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 2016, the improvement in ABC's return on equity occurred because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It is often difficult to find adequate b...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified