Question 1

Liability management ratios are one of the five basic categories of ratios.

Accepted Answer

A) True 
 B)False  False

Question 2

The degree of operating leverage measures the sensitivity of operating income to changes in the level of output.

Accepted Answer

A) True 
 B)False  True

Question 3

Stock ratios are one of the five basic categories of ratios.

Accepted Answer

A) True 
 B)False  False

Question 4

The total asset turnover is computed as net sales divided by total assets.

Accepted Answer

A) True 
 B)False

Question 5

Which one of the following is not a basic element or component of the percentage of sales approach to long-term financial planning?

Accepted Answer

A)  asset investment requirements 
B)  internally generated financing 
C)  spontaneous increases in current liabilities 
D)  automatic increases in cash inflows 
A)  asset investment requirements 
B)  internally generated financing 
C)  spontaneous increases in current liabilities 
D)  automatic increases in cash inflows

Question 6

Accounts payable∕(Cost of goods sold∕365)

Accepted Answer

A)  Current ratio 
B)  Quick ratio 
C)  Average payment period 
D)  Fast ratio 
A)  Current ratio 
B)  Quick ratio 
C)  Average payment period 
D)  Fast ratio

Question 7

External financing needs can be calculated by subtracting the addition to retained earnings and an increase in spontaneous financing from a firm's change in assets.

Accepted Answer

A) True 
 B)False

Question 8

Profitability ratios are one of the five basic categories of ratios.

Accepted Answer

A) True 
 B)False

Question 9

The current ratio is always greater than or equal to one.

Accepted Answer

A) True 
 B)False

Question 10

ROE directly reflects a firm's use of leverage.

Accepted Answer

A) True 
 B)False

Question 11

A firm with a total asset turnover lower than the industry standard and a current ratio which meets the industry standard may have

Accepted Answer

A)  excessive current assets. 
B)  excessive inventory. 
C)  excessive accounts receivable. 
D)  excessive long term assets. 
A)  excessive current assets. 
B)  excessive inventory. 
C)  excessive accounts receivable. 
D)  excessive long term assets.

Question 12

The quick ratio is a stricter measure of liquidity compared to the current ratio.

Accepted Answer

A) True 
 B)False

Question 13

Liquidity ratios are one of the five basic categories of ratios.

Accepted Answer

A) True 
 B)False

Question 14

As part of the measurement of financial leverage, the total debt ratio is calculated as:

Accepted Answer

A)  total liabilities divided by total assets 
B)  total liabilities times total assets 
C)  current liabilities divided by total assets 
D)  total assets minus current liabilities divided by total liabilities divided by total liabilities 
A)  total liabilities divided by total assets 
B)  total liabilities times total assets 
C)  current liabilities divided by total assets 
D)  total assets minus current liabilities divided by total liabilities divided by total liabilities

Question 15

(Cash + Marketable securities + Accounts receivable) ∕ Current liabilities

Accepted Answer

A)  Current ratio 
B)  Quick ratio 
C)  Average payment period 
D)  Fast ratio 
A)  Current ratio 
B)  Quick ratio 
C)  Average payment period 
D)  Fast ratio

Question 16

Net sales ∕ Net fixed assets

Accepted Answer

A)  Total asset turnover 
B)  Fixed assets turnover 
C)  Average collection period 
D)  Inventory turnover 
A)  Total asset turnover 
B)  Fixed assets turnover 
C)  Average collection period 
D)  Inventory turnover

Question 17

Accounting standards often differ among firms in an industry.

Accepted Answer

A) True 
 B)False

Question 18

The inventory turnover ratio is computed by dividing the cost of goods sold by the average inventory.

Accepted Answer

A) True 
 B)False

Question 19

Which group of ratios might be most interesting to potential creditors of a firm?

Accepted Answer

A)  asset utilization ratios 
B)  profitability ratios 
C)  leverage ratios 
D)  market value ratios 
A)  asset utilization ratios 
B)  profitability ratios 
C)  leverage ratios 
D)  market value ratios

Question 20

Earnings before interest & taxes / Interest expense

Accepted Answer

A)  Total debt to total assets 
B)  Equity multiplier 
C)  Interest coverage 
D)  Fixed charge coverage 
A)  Total debt to total assets 
B)  Equity multiplier 
C)  Interest coverage 
D)  Fixed charge coverage

Liability management ratios are one of the five basic categories of ratios.

The degree of operating leverage measures the sensitivity of operating income to changes in the level of output.

Stock ratios are one of the five basic categories of ratios.

The total asset turnover is computed as net sales divided by total assets.

Which one of the following is not a basic element or component of the percentage of sales approach to long-term financial planning?

Accounts payable∕(Cost of goods sold∕365)

External financing needs can be calculated by subtracting the addition to retained earnings and an increase in spontaneous financing from a firm's change in assets.

Profitability ratios are one of the five basic categories of ratios.

The current ratio is always greater than or equal to one.

ROE directly reflects a firm's use of leverage.

A firm with a total asset turnover lower than the industry standard and a current ratio which meets the industry standard may have

The quick ratio is a stricter measure of liquidity compared to the current ratio.

Liquidity ratios are one of the five basic categories of ratios.

As part of the measurement of financial leverage, the total debt ratio is calculated as:

(Cash + Marketable securities + Accounts receivable) ∕ Current liabilities

Net sales ∕ Net fixed assets

Accounting standards often differ among firms in an industry.

The inventory turnover ratio is computed by dividing the cost of goods sold by the average inventory.

Which group of ratios might be most interesting to potential creditors of a firm?

Earnings before interest & taxes / Interest expense

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 14: Financial Analysis and Long-Term Financial Planning

Liability management ratios are one of the five basic categories of ratios.

The degree of operating leverage measures the sensitivity of operating income to changes in the level of output.

Stock ratios are one of the five basic categories of ratios.

The total asset turnover is computed as net sales divided by total assets.

Which one of the following is not a basic element or component of the percentage of sales approach to long-term financial planning?

Accounts payable∕(Cost of goods sold∕365)

External financing needs can be calculated by subtracting the addition to retained earnings and an increase in spontaneous financing from a firm's change in assets.

Profitability ratios are one of the five basic categories of ratios.

The current ratio is always greater than or equal to one.

ROE directly reflects a firm's use of leverage.

A firm with a total asset turnover lower than the industry standard and a current ratio which meets the industry standard may have

The quick ratio is a stricter measure of liquidity compared to the current ratio.

Liquidity ratios are one of the five basic categories of ratios.

As part of the measurement of financial leverage, the total debt ratio is calculated as:

(Cash + Marketable securities + Accounts receivable) ∕ Current liabilities

Net sales ∕ Net fixed assets

Accounting standards often differ among firms in an industry.

The inventory turnover ratio is computed by dividing the cost of goods sold by the average inventory.

Which group of ratios might be most interesting to potential creditors of a firm?

Earnings before interest & taxes / Interest expense

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters