TIM 305 Chapter 3

Treasury stock is an asset.

False

All interested parties would like to have a high times interest earned ratio.

True

Assets are held by the firm to generate revenues and cash flows.

True

Over the long term, successful companies generate positive cash flows from

operating activities.

Which of the following is an example of an "other" asset?

patents

Cash is found in the owner's equity account.

False

It is always easy to know which firms comprise an industry average.

False

Liquidity ratios measure the amount of long-term debt held by the firm.

False

Owners would like to have a higher current ratio than lenders.

False

The DuPont ratio is a combination of two ratios.

False

The uniform system of accounts helps managers organize the statement of cash flows.

False

Which of the following is a limitation of ratio analysis?

Ratios are more meaningful when compared to some standard of performance.

A manager could manipulate (improve) the asset turnover ratio by failing to replace older assets on a timely basis.

True

RevPar can be calculated by multiplying the occupancy percentage by the ADR.

True

The detail of a hotel income statement will vary depending on the needs of the user.

True

The income statement indicates firm performance between two balance sheet dates.

True

The statement of cash flows has three major components.

True

A manager at a local food service establishment recently calculated her food cost percentage to be 43%. This percentage is:

can't tell.

Another name for department profit is

contribution margin

A high inventory turnover ratio

could indicate a problem with "stockouts."

The DuPont ratio shows that return on assets is a function of

current ratio and debt ratio.

If current liabilities exceed current assets, then the:

current ratio will be less than one.

The impact of the Enron accounting scandal was

increased investor scrutiny regarding financial statements and the audit process.

Securities held by the firm for more than are year are classified as

long-term investments.

For current liabilities, "current" means

payable within a year.

Dividends

reduce retained earnings when declared.

The number of times interest earned is a

solvency ratio

A share of Outback Steakhouse common stock sells for $37. If the P/E ratio is 15, how much are the earnings per share?

$2.47

If total revenue is $100,000, net income is $40,000, and total assets equal $200,000, then return on investment is

20 percent.

Which of the following is the preferred measure of hotel performance?

ADR