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Multiple Choice Quiz
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1

Which of the following is generally considered one of the major categories on a typical statement of cash flows?
A)Subsidiary activities
B)Notes payable activities
C)Operating activities
D)Income statement activities
E)Division activities
2

Comparison of the financial statements of two firms in the same general industry may be difficult if
I. the size of the two firms' operations are different
II. the firms have identical product lines and operations
III. the firms' financial statements are prepared using different fiscal year-ends
A)I only
B)III only
C)I and II only
D)I and III only
E)I, II and III
3

In a common size statement, the balance sheet is expressed as a percentage of ____________ while the income statement is expressed as a percentage of ____________.
A)liabilities plus equity; net income
B)assets; net income
C)sales; liabilities plus equity
D)liabilities plus equity; sales
E)liabilities; sales
4

You are comparing two companies by looking at financial ratios they publish in their annual reports. You know that
I. you must be careful because not all financial statement ratios are computed the same way
II. the financial ratios of a large firm and a medium size firm cannot be compared
III. these financial ratios will capture the relevant differences between the two firms, leaving you with no need to look at the rest of the reports
A)I only
B)II only
C)III only
D)I and II only
E)I and III only
5

The interval measure is an example of a ____________ ratio.
A)short-term solvency
B)financial leverage
C)asset management
D)profitability
E)market value
6

Which of the following statements about the current ratio is accurate?
A)Use of book values in calculation of this ratio is unacceptable because the market values of these assets and liabilities tend to deviate from book values
B)This ratio is computed by dividing current liabilities by current assets
C)It will always be greater than the quick ratio in companies that carry inventory
D)This ratio is intended to indicate the long run liquidity position of the firm
E)The higher the current ratio the higher the level of cash in a firm
7

____________ is considered to be a liquidity ratio.
A)The return on assets
B)The fixed asset turnover
C)The cash ratio
D)The times interest earned ratio
E)The profit margin
8

____________ are designed to determine a firm's long-run ability to meet its obligations.
A)Liquidity ratios
B)Asset-utilization ratios
C)Profitability ratios
D)Financial leverage ratios
E)Market value ratios
9

Which of the following is NOT incorporated into calculation of the Du Pont identity?
A)Return on assets
B)Equity multiplier
C)Total asset turnover
D)Profit margin
E)Receivables turnover
10

What does the fixed asset turnover ratio measure?
A)How well total assets are utilized during a year
B)The length of time it takes a firm to completely replace its fixed assets
C)The amount of EBIT a firm generates per dollar of fixed assets
D)The percent of total assets that are invested in fixed assets
E)The amount of sales each dollar of fixed assets generates





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