finance exam 1

What does it mean when a firm has a days' sales in receivables of 45?

The firm collects its credit sales in 45 days on average.

Short-term solvency ratios are also called ______ ratios.

liquidity

A firm with a 26 percent return on equity earned ______ cents in profit for every one dollar in shareholders' equity.

26

Which of the following are components of cash flow from assets?

Change in net working capital Operating cash flow Capital spending

the new york stock exchange is a

auction market

The DuPont identity breaks ROE into ____ incorrect parts.

three

What is an important mechanism used by unhappy stockholders to replace current management?

Proxy fight

What is the impact on the total asset turnover ratio if sales increase significantly while there is no change in any of the other variables?

The total asset turnover ratio will increase.

What is true of financial ratios?

They are developed from a firm's financial information. They are used for comparison purposes.

financial ratios ____

They are used for comparison purposes. They are developed from a firm's financial information.

What is the primary objective of an auction market?

To bring buyers and sellers together

The current ratio computes the relationship between ____.

current assets and current liabilities

True or false: Blue Company and Red Company have equal levels of current assets and current liabilities. Blue Company has higher inventory levels than Red Company. Blue Company is more liquid than Red Company.

false

true or false: Financial ratios are computed using balance sheet information.

false

Long-term solvency ratios measure what aspect of the firm's financial position?

financial leverage

Long-term solvency ratios are also known as:

financial leverage ratios

If sales increase while there is no change in accounts receivable, the receivables turnover ratio will ______.

increase

For a mature firm, operating cash flow:

is a sign of trouble if negative over a long period of time is usually positive

If a company has inventory, the quick ratio will always be ___ than the current ratio.

less

A positive operating cash flow indicates that the firm is generating enough cash to:

pay everyday cash outflows.

________ financial statements enable one to compare firms that differ in size.

standardized