Financial Management Chapter 3 (Mississippi State)

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following?

0.5

Which one of the following is a use of cash?

Decrease in accounts payable

Which one of these identifies the relationship between the return on assets and the return on equity?

DuPont Identity

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

accounts receivable

Relationships determined from a firm's financial information and used for comparison purposes are known as:

financial ratios

If a firm produces a 13 percent return on assets and also a 13 percent return on equity, then the firm:

has an equity multiplier of 1.0

The price-sales ratio is especially useful when analyzing firms that have which one of the following?

negative earnings

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

profitability

A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of:

sales

Ratios that measure a firm's liquidity are known as _____ ratios.

short-term solvency

On a common-size balance sheet all accounts for the current year are expressed as a percentage of:

total assets for the current year

Tobin's Q relates the market value of a firm's assets to which one of the following?

Today's cost to duplicate those assets.

Lenders probably have the most interest in which one of the following sets of ratios?

Long-term debt and times interest earned.

Which one of the following accurately describes the three parts of the DuPont identity?

Equity multiplier, profit margin, and total asset turnover.

The most acceptable method of evaluating the financial statements of a firm is to compare the firm's current:

Financial ratios to the firm's historical ratios.

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

decrease in quick ratio