Quiz
Chapter 14: Financial Statement and Ratio Analysis
Questions in this quiz (30)
1The assets on the balance sheet produce the income of the firm.
- ATrue
- BFalse
2In common-sized financial statements each item is expressed as either a percentage of total assets or total liabilities.
- ATrue
- BFalse
3The greater the debt ratio, the less risky a firm is.
- ATrue
- BFalse
4In general, a firm's inventory is its most liquid possession.
- ATrue
- BFalse
5Gary's Garage has an inventory turnover ratio that is twice the industry's ratio. It is safe to assume Gary's Garage is a profitable firm.
- ATrue
- BFalse
6When ratios of differing years are being compared, inflation should be taken into consideration.
- ATrue
- BFalse
7If the net working capital is negative, current liabilities exceed current assets.
- ATrue
- BFalse
8The accounts receivable turnover ratio is often called the days sales in receivables.
- ATrue
- BFalse
9A P/E ratio of 30 indicates that investors are willing to pay $30 for each $1 of earnings.
- ATrue
- BFalse
10When referring to ratio comparisons, time-series analysis compares a firm to that (word?) industry leader.
- ATrue
- BFalse
11The liquidity of a business firm refers to the solvency of the firm's overall financial position.
- ATrue
- BFalse
12Total assets turnover commonly measures the liquidity of a firm's total assets.
- ATrue
- BFalse
13The less fixed-cost debt, or financial leverage, a firm uses, the greater will be its risk and return.
- ATrue
- BFalse
14The average age of inventory is viewed as the average length of time inventory is held by the firm or as the average number of days' sales inventory.
- ATrue
- BFalse
15Both present and prospective shareholders are intersected in the firm's current and future level of risk and return. These two dimensions directly affect share price.
- ATrue
- BFalse
16If Lacey Corporation has total shares of $750,000, one-half of which are credit sales. If the balance sheet reports accounts receivable of $52,369, what is Lacey's average collection period?
- Aa) 50 days
- Bb) 35 days
- Cc) 182 days
- Dd) not enough information
17A firm's fixed assets are termed as its ________ assets.
- Aa) earning
- Bb) equity
- Cc) short-term
- Dd) variable
18_______________ refers to the solvency of the firm's overall financial position, the ease with which it can pay bills.
- Aa) Coverage
- Bb) Leverage
- Cc) Liquidity
- Dd) Turnover
19_________ ratios measure the ability to convert assets to cash
- Aa) Liquidity
- Bb) Management
- Cc) Profitability
- Dd) Activity
20Terry's Tire Company has earnings before taxes of $1.43 million. It has 275,000 of common stock outstanding. The tax rate is 40$. What is Terry's EPS?
- Aa) $5.20
- Bb) $3.12
- Cc) $2.08
- Dd) $3.25
21The _________ ratio measures the firm's ability to meet interest payments.
- Aa) times interest earned
- Bb) debt ratio
- Cc) debt-equity
- Dd) quick ratio
22Sales are $3 million and total asset turner is 1.70. What are the firm's total assets?
- Aa) $2,500,000
- Bb) $2,142,857
- Cc) $1,764,706
- Dd) $1,875,000
23The Du Pont Analysis allows firms to break their return on equity down into all of the following except:
- Aa) use of leverage
- Bb) inventory usage
- Cc) efficiency of asset usage
- Dd) net profit in sales
24In 1998, sales were $363,000 with a gross margin of $64,000. On January 1, the firm had $107,000 in inventory and $36,000 on December 31. What is the firm's inventory turnover?
- Aa) 3.39
- Bb) 4.18
- Cc) .90
- Dd) 5.08
25All of the following should be used to analyze a firm except:
- Aa) Perform a trend analysis
- Bb) Analyze a firm's ratios with competitors
- Cc) Perform a terminal cash flow
- Dd) Analyze a firm's strengths and weaknesses
26Ratio provide a ________ measure of a company's performance and condition.
- Aa) definitive
- Bb) gross
- Cc) relative
- Dd) qualitative
27Pne means to negate the effect of inflation on ratio analysis is to value the fixed assets at:
- Aa) book value
- Bb) liquidation value
- Cc) replacement value
- Dd) depreciation
28The _________ ratio provides the information critical to the long-run operation of the firm.
- Aa) liquidity
- Bb) activity
- Cc) debt
- Dd) profitability
29A decrease in total asset turnover will result in _____________ in the return on equity.
- Aa) an increase
- Bb) no change
- Cc) a decrease
- Dd) an undetermined change
30______________ is used by financial managers as a structure of dissecting the firm's financial statements to assess its financial condition.
- Aa) Statement of Cash Flow
- Bb) Common-size income statement
- Cc) The Du Pont system of analysis
- Dd) Cross-sectional analysis
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- Quiz on Chapter 14: Financial Statement and Ratio Analysis, created by rainierdeocampo on 26/09/2015.
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- rainierdeocampo
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