The assets on the balance sheet produce the income of the firm.
In common-sized financial statements each item is expressed as either a percentage of total assets or total liabilities.
The greater the debt ratio, the less risky a firm is.
In general, a firm's inventory is its most liquid possession.
Gary'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.
When ratios of differing years are being compared, inflation should be taken into consideration.
If the net working capital is negative, current liabilities exceed current assets.
The accounts receivable turnover ratio is often called the days sales in receivables.
A P/E ratio of 30 indicates that investors are willing to pay $30 for each $1 of earnings.
When referring to ratio comparisons, time-series analysis compares a firm to that (word?) industry leader.
The liquidity of a business firm refers to the solvency of the firm's overall financial position.
Total assets turnover commonly measures the liquidity of a firm's total assets.
The less fixed-cost debt, or financial leverage, a firm uses, the greater will be its risk and return.
The 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.
Both 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.
If 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?
a) 50 days
b) 35 days
c) 182 days
d) not enough information
A firm's fixed assets are termed as its ________ assets.
a) earning
b) equity
c) short-term
d) variable
_______________ refers to the solvency of the firm's overall financial position, the ease with which it can pay bills.
a) Coverage
b) Leverage
c) Liquidity
d) Turnover
_________ ratios measure the ability to convert assets to cash
a) Liquidity
b) Management
c) Profitability
d) Activity
Terry'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?
a) $5.20
b) $3.12
c) $2.08
d) $3.25
The _________ ratio measures the firm's ability to meet interest payments.
a) times interest earned
b) debt ratio
c) debt-equity
d) quick ratio
Sales are $3 million and total asset turner is 1.70. What are the firm's total assets?
a) $2,500,000
b) $2,142,857
c) $1,764,706
d) $1,875,000
The Du Pont Analysis allows firms to break their return on equity down into all of the following except:
a) use of leverage
b) inventory usage
c) efficiency of asset usage
d) net profit in sales
In 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?
a) 3.39
b) 4.18
c) .90
d) 5.08
All of the following should be used to analyze a firm except:
a) Perform a trend analysis
b) Analyze a firm's ratios with competitors
c) Perform a terminal cash flow
d) Analyze a firm's strengths and weaknesses
Ratio provide a ________ measure of a company's performance and condition.
a) definitive
b) gross
c) relative
d) qualitative
Pne means to negate the effect of inflation on ratio analysis is to value the fixed assets at:
a) book value
b) liquidation value
c) replacement value
d) depreciation
The _________ ratio provides the information critical to the long-run operation of the firm.
a) liquidity
b) activity
c) debt
d) profitability
A decrease in total asset turnover will result in _____________ in the return on equity.
a) an increase
b) no change
c) a decrease
d) an undetermined change
______________ is used by financial managers as a structure of dissecting the firm's financial statements to assess its financial condition.
a) Statement of Cash Flow
b) Common-size income statement
c) The Du Pont system of analysis
d) Cross-sectional analysis
