fnan300 ch 2

A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm:

has positive net working capital

Leon is the owner of a corner store. Which ratio should he compute if he wants to know how long the store can pay its bills given its current level of cash and accounts receivable? Assume all receivables are collectible when due.

quick ratio

If a firm has an inventory turnover of 15, the firm:

sells its entire inventory an average of 15 times each year

The DuPont identity can be accurately defined as:

Equity multiplier × Return on assets.

Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0.

cash payment of an account payable

Which one of these transactions will increase the liquidity of a firm?

credit sale of inventory at cost

Which one of the following will increase the profit margin of a firm, all else held constant?

decrease in the tax rate

A firm can increase its sustainable rate of growth by decreasing its:

dividends

The ratios that are based on financial statement values and used for comparison purposes are called

financial ratios

A common-size balance sheet helps financial managers determine:

if changes are occurring in a firm's mix of assets.

The cash ratio is used to evaluate the:

length of time that a firm can pay its bills if no additional cash becomes available.

The Wood Shop generates $.97 in sales for every $1 invested in total assets. Which one of the following ratios would reflect this relationship?

total asset turnover