Which one of the following will decrease if a firm can decrease its operating costs, all else constant?
Correct answer(s):
- price-earnings ratio
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If a firm produces a twelve percent return on assets and also a twelve percent return on equity, then the firm:
Correct answer(s):
- has an equity multiplier of 1.0.
Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.
Correct answer(s):
- profitability
Dee’s has a fixed asset turnover rate of 1.12 and a total asset turnover rate of 0.91. Sam’s has a fixed asset turnover rate of 1.15 and a total asset turnover rate of 0.88. Both companies have similar operations. Based on this information, Dee’s must be doing which one of the following?
Correct answer(s):
- utilizing its total assets more efficiently than Sam's
The Corner Hardware has succeeded in increasing the amount of goods it sells while holding the amount of inventory on hand at a constant level. Assume that both the cost per unit and the selling price per unit also remained constant. This accomplishment will be reflected in the firm’s financial ratios in which one of the following ways?
Correct answer(s):
- decrease in the day's sales in inventory
Jasper United had sales of $21,000 in 2008 and $24,000 in 2009. The firm’s current accounts remained constant. Given this information, which one of the following statements must be true?
Correct answer(s):
- The net working capital turnover rate increased.
The cash coverage ratio directly measures the ability of a firm’s revenues to meet which one of its following obligations?
Correct answer(s):
- payment of interest to a lender
If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following?
Correct answer(s):
- 0.5
Which one of the following statements is correct?
Correct answer(s):
- An increase in the depreciation expense will not affect the cash coverage ratio.
Ratios that measure a firm’s financial leverage are known as ____ ratios.
Correct answer(s):
- long-term solvency
Over the past year, the quick ratio for a firm increased while the current ratio remained constant. Given this information, which one of the following must have occurred? Assume all ratios have positive values.
Correct answer(s):
- inventory decreased
A firm has an interval measure of 48. This means that the firm has sufficient liquid assets to do which one of the following?
Correct answer(s):
- cover its operating costs for the next 48 days
A supplier, who requires payment within ten days, should be most concerned with which one of the following ratios when granting credit?
Correct answer(s):
- cash
An increase in which one of the following will increase a firm’s quick ratio without affecting its cash ratio?
Correct answer(s):
- accounts receivable
An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.
Correct answer(s):
- decrease in the quick ratio
A firm uses 2008 as the base year for its financial statements. The common-size, base-year statement for 2009 has an inventory value of 1.08. This is interpreted to mean that the 2009 inventory is equal to 108 percent of which one of the following?
Correct answer(s):
- 2008 inventory expressed as a percent of 2008 total assets
On a common-base year financial statement, accounts receivables will be expressed relative to which one of the following?
Correct answer(s):
- base-year accounts receivables
On a common-size balance sheet all accounts are expressed as a percentage of:
Correct answer(s):
- total assets for the current year.
According to the Statement of Cash Flows, an increase in interest expense will ____ the cash flow from ____ activities.
Correct answer(s):
- decrease; operating
According to the Statement of Cash Flows, a decrease in accounts receivable will _____ the cash flow from _____ activities.
Correct answer(s):
- increase; operating