Quiz #4: Chapter 5 Analysis of Financial Statements

A current ratio of 0.9 means:

. the firm has $0.90 of current assets for $1.00 of current liabilities

Exxon-Mobil (XOM) has $2 billion in total assets. The other side of its balance sheet consists of $0.2 billion in current liabilities, $0.6 billion in long-term debt, and $1.2 billion in common equity. XOM has 300 million shares of common stock outstanding, and its stock price is $20 per share. What is XOM's market/book ratio?:

5.00

All else being equal, which of the following will increase a company's current ratio:

An increase in accounts receivable

Johnson Inc. has a current ratio of 1.7. Thompson Inc. has a current ratio of 2.2. Which of the following is true?

None of the above is necessarily true

South Korea Telecom (SKM) has a debt/equity ratio of 8.1. This means:

SKM has 8.1 times more debt than equity

Sony and Toshiba each recently reported the same earnings per share (EPS). Sony's stock, however, trades at a higher price. Which of the following statements is most correct?

Sony must have a higher P/E ratio

A significantly higher collection period than the industry average may suggest:

poor credit decisions

If the inventory turnover ratio is very high relative to the industry:

the firm may be losing sales if its inventory is too low