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| 1 | |
Asset utilization ratios are intended to describe how efficiently a firm uses its assets to generate sales. |
| | A) | True |
| | B) | False |
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| 2 | |
When analyzing a financial statement, it is difficult to determine which ratios are most important and what the appropriate range for each ratio should be. |
| | A) | True |
| | B) | False |
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| 3 | |
A comparison of the financial statements of two firms in the same general industry may be difficult if:
I the firm's financial statements are prepared using different fiscal year-ends.
II one or both firms have international operations.
III the size of the two firms' operations are different. |
| | A) | I only |
| | B) | II and III only |
| | C) | I and III only |
| | D) | I and II only |
| | E) | I, II, and III |
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| 4 | |
Which one of the following types of ratios is used to determine a firm's long-run ability to meet its financial obligations? |
| | A) | liquidity |
| | B) | asset-utilization |
| | C) | profitability |
| | D) | financial leverage |
| | E) | market value |
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| 5 | |
The sales of Jack's Sporting Goods have increased recently and inventory has declined slightly. A financial analyst would expect to find that the inventory turnover has __________ and the days' sales inventory has: |
| | A) | increased; increased. |
| | B) | increased; decreased. |
| | C) | decreased; increased. |
| | D) | decreased; decreased. |
| | E) | not changed; not changed. |
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| 6 | |
Golf, Inc., and Swing, Inc., are close competitors. Last year, both had the same amount of cost of goods sold, but Golf turned its inventory 5 times during the year while Swing turned its inventory every 65 days. Which one of the following statements is true if the objective of both firms is to keep average inventory as low as possible? |
| | A) | Golf did a better job since its inventory turnover is lower. |
| | B) | Swing did a better job since its days' sales in inventory is lower. |
| | C) | Golf did a better job since its days' sales in inventory is lower. |
| | D) | Swing did a better job since its inventory turnover is lower. |
| | E) | Golf did a better job since its level of inventory is lower. |
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| 7 | |
ABCO, Inc., has a ROA of 8 percent, a dividend payout ratio of 30 percent, an equity multiplier of 1.5, and a profit margin of 5 percent. What is the firm's maximum sustainable rate of growth? |
| | A) | 2.46 percent |
| | B) | 3.73 percent |
| | C) | 5.93 percent |
| | D) | 7.28 percent |
| | E) | 9.17 percent |
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| 8 | |
Which one of the following statements is correct? |
| | A) | According to the Du Pont identity, ROE is affected by the profit margin, the total asset turnover, and the market-to-book ratio. |
| | B) | It is straightforward to compute the market value based measures of firm performance using financial statements prepared according to GAAP. |
| | C) | Turnover ratios measure the intensity and efficiency of asset use. |
| | D) | For common-size statements, you divide asset and liability accounts by total assets and income statement accounts by net income. |
| | E) | The retention ratio minus the dividend payout ratio must equal 100 percent. |
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| 9 | |
A firm has sales of $750, total assets of $400, and a debt-equity ratio of 1.50. If the return on equity is 10 percent, what is the firm's net income? |
| | A) | $16 |
| | B) | $20 |
| | C) | $32 |
| | D) | $40 |
| | E) | $75 |
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| 10 | |
Which one of the following is a liquidity ratio? |
| | A) | return on assets |
| | B) | cash coverage ratio |
| | C) | quick ratio |
| | D) | times interest earned |
| | E) | profit margin |
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