BUS finance Chapter 3
dividends.
A firm can increase its sustainable rate of growth by decreasing its:
has positive net working capital.
A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm:
total assets.
Common-size financial statements present all balance sheet account values as a percentage of:
if changes are occurring in a firm's mix of assets.
A common-size balance sheet helps financial managers determine
Dividend payout ratio
Alameda Markets would like to increase its internal rate of growth. Decreasing which one of the following will help the firm achieve its goal?
Price-earnings ratio
All else held constant, which one of the following will decrease if a firm increases its net income?
Common-size income statement
Builder's Outlet just hired a new chief financial officer. To get a feel for the company, she wants to compare the firm's sales and costs over the past three years to determine if any trends are present and also determine where the firm might need to make changes. Which one of the following statements will best suit her purposes?
zero percent.
If a firm has a 100 percent dividend payout ratio, then the internal growth rate of the firm is
sells its entire inventory an average of 15 times each year.
If a firm has an inventory turnover of 15, the firm:
Quick ratio
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.
vary in direct relation to the net profit percentage.
Quincy Real Estate pays out a fixed percentage of its net income to its shareholders in the form of annual dividends. Given this, the percentage shown on a common-size income statement for the dividend account will:
Total asset turnover
Scranton Paper Company generates $.97 in sales for every $1 invested in total assets. Which one of the following ratios would reflect this relationship?
length of time that a firm can pay its bills if no additional cash becomes available.
The cash ratio is used to evaluate the:
one plus the debt-equity ratio.
The equity multiplier is equal to:
financial ratios.
The ratios that are based on financial statement values and used for comparison purposes are called:
the debt-equity ratio will be held constant.
The sustainable growth rate is based on the premise that:
No new external equity and a constant debt-equity ratio
The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions?
Cash payment of an account payable
Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0.
A decrease in the capital intensity ratio
Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past?
Cash coverage ratio
Which one of the following is a measure of long-term solvency?
Internal growth rate
Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing?
Decrease in the tax rate
Which one of the following will increase the profit margin of a firm, all else held constant?
A high PE ratio may indicate that a firm is expected to grow significantly.
Which one of these statements is true concerning the price-earnings (PE) ratio?
Credit sale of inventory at cost
Which one of these transactions will increase the liquidity of a firm?
Price-sales ratio
Which ratio was primarily designed to monitor firms with negative earnings?
Cash coverage ratio = 2.6; debt-equity ratio = .3
You would like to borrow money three years from now to build a new building. In preparation for applying for that loan, you are in the process of developing target ratios for your firm. Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future?