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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
Which one of the following is a source of cash?
Correct answer(s):
- decrease in inventory
Which one of the following is a source of cash?
Correct answer(s):
- acquisition of debt
Which one of the following is a use of cash?
Correct answer(s):
- decrease in common stock
Which one of the following is a source of cash?
Correct answer(s):
- increase in accounts payable
The U.S. government coding system that classifies a firm by the nature of its business operations is known as the:
Correct answer(s):
- Standard Industrial Classification code.
The formula which breaks down the return on equity into three component parts is referred to as which one of the following?
Correct answer(s):
- Du Point identity
Relationships determined from a firm’s financial information and used for comparison purposes are known as:
Correct answer(s):
- financial ratios.
Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a common point in time?
Correct answer(s):
- common-base year statement
A common-size income statement is an accounting statement that expresses all of a firm’s expenses as percentage of:
Correct answer(s):
- sales.