FIN/419
Which of the following items are used to compute the current ratio?
Accounts payable Cash
True or false: The total debt ratio equals the total assets minus total equity divided total assets
TRUE
Which of the following create problems with financial statement analysis?
The firm or its competitors are global companies. The firm and its competitors operate under different regulatory environments. The firm or its competitors are conglomerates
Which of the following is (are) true of financial ratios?
They are developed from a firm's financial information. They are used for comparison purposes.
The DuPont identity breaks ROE into ___________parts.
Three
Which one of the following best explains why financial managers use a common-size balance sheet?
To track changes in a firm's capital structure
True or false: In a common-size income statement, each item is expressed as a percentage of total sales.
True
True or false: It is important to investigate trends in financial ratios to identify the reason for the trend.
True
The ___________payout ratio equals cash dividends divided by net income.
dividend
How is the price-earnings (PE) ratio computed?
Market price per share/Earnings per share
________ financial statements enable one to compare firms that differ in size.
Standardized
The current ratio computes the relationship between ____.
current assets and current liabilities
Given an internal growth rate of 3 percent, a firm can _____.
grow by 3 percent or less without any additional external financing
The information needed to compute the profit margin can be found on the ____.
income statement
Time-trend analysis is an example of
management by exception
Whenever ___________ information is available, it should be used instead of accounting data.
market
The price-earnings (PE) ratio is a ____ ratio.
market value
Based on the DuPont Identity, an increase in sales, all else held equal, __________ ROE.
may not change may increase or decrease
In a common-size income statement, each item is expressed as a percentage of total
sales
The profit margin is equal to net income divided by ______.
sales
A common-size balance sheet expresses accounts as a percentage of ______.
total assets
What is the formula for computing the internal growth rate (IGR)?
(ROA x b)/(1 - ROA x b)
Which of the following is the correct representation of the total debt ratio?
(Total assets - Total equity)/(Total assets)
The DuPont identity shows that____________ _________ times total asset turnover times equity multiplier equals ROE.
Blank 1: profit Blank 2: margin or margins
True or false: Financial ratios are computed using only balance sheet information.
False
True or false: If there is a conflict between market and accounting data, accounting data should be given precedence.
False
True or false: Inventory turnover is sales divided by inventory.
False
True or false: The DuPont identity is a popular expression breaking ROA into three parts.
False
True or false: The dividend payout ratio equals cash dividends divided by sales.
False
True or false: There is a solid and prescriptive method to select which ratios to use in financial statement analysis
False
Inventory turnover is cost of goods sold divided by
Inventory
