The question the common stockholders receive an adequate return on their is answered through the use of: a. ANSWER: b Difficulty: Moderate Keywords: average collection period 22. Given an accounts receivable turnover of 8 and annual credit sales of the average collection period year) is: a. ANSWER: b Difficulty: Moderate Keywords: quick ratio 21. Equipment is purchased and is financed a debt issue. Land held for investment is sold for cash. Which of the following transactions does not affect the quick ratio? a. ANSWER: True Difficulty: Easy Keywords: limitations of ratio analysis, accounting practices 20. Differences in accounting practices limit the use of ratio analysis. ANSWER: True Difficulty: Moderate Keywords: ratio 15. One weakness of the ratio is that it includes only the annual interest expense as a finance expense that must be paid. ANSWER: True Difficulty: Moderate Keywords: average collection period 14. The lower the average collection period ratio, the more efficient is the firm in managing its investment in accounts receivable. ANSWER: False Difficulty: Moderate Keywords: liquidity ratio 13. There is no such thing as a liquidity ratio being too high. ANSWER: True Difficulty: Easy Keywords: ratio analysis and standardization 12. Ratios are used to standardize financial information. ANSWER: True Difficulty: Easy Keywords: ratio analysis 11. Financial ratios can highlight a financial performance with regard to liquidity, solvency, and profitability. ANSWER: True Difficulty: Easy Keywords: ratio analysis 10. Financial ratios comprise the principal tool of financial analysis since they can be used to answer a variety of questions regarding a financial condition. ANSWER: True Difficulty: Moderate Keywords: limitations of ratio analysis 9. A serious pitfall in the interpretation of financial ratios arises when a company, whose business is seasonal, ends its accounting year on March 31, while most companies in the same industry end their accounting period on December 31. ANSWER: False Difficulty: Moderate Keywords: DuPont Analysis 8. According to the DuPont Analysis, an increase in net profit margin will decrease return on assets. ANSWER: True Difficulty: Moderate Keywords: industry averages 7. Financial ratios that are higher than industry averages may indicate problems which are as detrimental to the firm as ratios that are too low. ANSWER: True Difficulty: Moderate Keywords: ratio analysis 6. Ratios that examine profit relative to investment are useful in evaluating the overall effectiveness of the management. ANSWER: False Difficulty: Easy Keywords: current ratio, acid test ratio, leverage ratios 5. The current ratio and the acid test ratio are both measures of financial leverage. ANSWER: True Difficulty: Easy Keywords: DuPont analysis 4. The focus of DuPont analysis is to provide management information as to how the firm is using its resources to maximize returns on investments. ANSWER: True Difficulty: Easy Keywords: limitations of ratio analysis 3. Firms that engage in multiple lines of business make it difficult to assign them to an industry category for ratio analysis. ANSWER: False Difficulty: Easy Keywords: trend analysis 2. When the present financial ratios of a firm are compared with similar ratios for another firm in the same industry it is called trend analysis. Preview text Chapter 3 Evaluating Financial Performance 1. Quiz 05Q - Ch3part1 fin - Quiz, homework, finance 311, edition 13th year 2021.
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