FIN 3309 Chapter 3 - SmartBook

A firm with a market-to-book value that is greater than 1 is said to have ______ value for shareholders. 1 created 2 maintained 3 reduced 4 destroyed

1

Financial statement analysis is primarily "management by ______ ." exception analysis implication comparison

1

If a company has inventory, the quick ratio will always be ______ the current ratio. 1 less than 2 greater than 3 equal to

1

The information needed to compute the profit margin can be found on the ______. 1 income statement 2 balance sheet 3 cash flow statement

1

Which of the following are traditional financial ratio categories? 1 financial leverage ratios 2 turnover ratios 3 competition ratios 4 real options ratios 5 profitability ratios

125

If sales increase while there is no change in accounts receivable, the receivables turnover ratio will ______. 1 remain unchanged 2 increase 3 decrease

2

The price-earnings (PE) ratio is a ______ ratio. 1 liquidity 2 market value 3 turnover 4 leverage

2

The profit margin is equal to net income divided by ______. 1 total assets 2 sales 3 operating income 4 net working capital

2

What does it mean when a firm has a days' sales in receivables of 45? 1 The firm is able to collect 45 percent of its credit sales. 2 The firm collects its credit sales in 45 days on average. 3 The firm is able to collect 55 percent of its credit sales. 4 The firm collects its credit sales in 320 (365 − 45) days on average.

2

Which of the following best explains why financial managers use a common-size income statement? 1 The common-size income statement can show sources of cash for the company. 2 The common-size income statement can show which costs are rising or falling as a percentage of sales.

2

Which one of the following is the correct equation for computing return on assets (ROA)? 1 sales/total assets 2 net income/total assets 3 net income/sales 4 total assets/net income

2

______ financial statements enable one to compare firms that differ in size. 1 Restated 2 Standardized 3 Compressed 4 Original

2

Which of the following items are used to compute the current ratio? 1 earnings 2 cash 3 accounts payable 4 equipment

23

Common-size statements are best used for comparing: 1 firms in different industries. 2 year-to-year for your firm. 3 firms of different sizes. 4 competitors.

234

A common-size balance sheet expresses accounts as a percentage of ______. 1 total equity 2 sales 3 total assets 4 total liabilities

3

Days' sales in receivables is given by the following ratio: 1 365/sales 2 accounts receivable/365 3 365/receivables turnover 4 receivables turnover/365

3

How is the inventory turnover ratio computed? 1 Current assets/Inventory 2 Inventory/Cost of good sold 3 Cost of goods sold/Inventory 4 Inventory/Total assets

3

The cash ratio is found by dividing cash by: 1 shareholders' equity. 2 current assets. 3 current liabilities. 4 inventory.

3

Which of the following is the correct representation of the total debt ratio? 1 Long-term debt/Total assets 2 Total equity/Total long-term debt 3 (Total assets − Total equity)/(Total assets)

3

Which of the following represents the receivables turnover ratio? 1 Accounts receivable/Cost of goods sold 2 Accounts receivable/Sales 3 Sales/Accounts receivable 4 Cost of goods sold/Accounts receivable

3

Which one of the following best explains why financial managers use a common-size balance sheet? 1 to keep an eye on the firm's profit margin 2 to monitor labor costs 3 to track changes in a firm's capital structure 4 to identify changes in operating costs

3

Which of the following are true of financial ratios? 1 They are computed in the same manner by all firms. 2 They always reflect market values. 3 They are developed from a firm's financial information. 4 They use only balance sheet data. 5 They are used for comparison purposes.

35

The current ratio computes the relationship between ______. 1 current and liquid assets 2 current assets and long-term liabilities 3 current and long-term assets 4 current assets and current liabilities

4

Whenever ______ information is available, it should be used instead of accounting data. 1 trivial 2 historical 3 any other 4 market

4

Which of the following is the correct equation for return on equity? 1 Total equity/Net income 2 Net income/Sales 3 Sales/Net income 4 Net income/Total equity

4

True or false: If a company has inventory, the quick ratio will always be greater than the current ratio. True false question.

f

True or false: Inventory turnover is sales divided by inventory. True false question

f

True or false: The cash ratio is found by dividing cash by current liabilities. True false question.

t