buad 195 - ch. 3

Which of the following is a potential problem of utilizing ratio analysis?

• Trends and industry averages are historical in nature.

• Financial data may be distorted due to price-level changes.

• Firms within an industry may not use similar accounting methods.

• All of the options.

In addition to comparison with industry ratios, it is also helpful to analyze ratios using

• Future projections.

• Historial data.

• Only industry ratios provide valid comparisons.

• Trend analysis and historical comparisons.

Trend and industry analysis provides all of the following information except:

• Benchmarking.

• The progress of the company.

• A basis for decision making about capital structure.

• Future information about the company.

A quick ratio much smaller than the current ratio reflects:

• A small portion of current assets is in inventory.

• A large portion of current assets is in inventory.

• That the firm will have a high inventory turnover.

• That the firm will have a high return on assets.

If XYZ's receivable turnover is 4x, what does that mean?

• XYZ's total sales are rotated four times a year.

• XYZ has an excellent receivables turnover rate.

• XYZ is able to collect its receivables every 90 days, or 4 times a year.

• XYZ generates four times as much sales through receivables than sales through cash.

In examining the liquidity ratios, the primary emphasis is the firm's

• Ability to effectively employ its resources.

• Overall debt position.

• Ability to pay short-term obligations on time.

• Ability to earn an adequate return or profits.

If a company's accounts receivable turnover is increasing, the average collection period

• Is going up slightly.

• Is going down.

• Could be moving in either direction.

• Is going up by a significant amount.

Which of the following is a profitability ratio?

• Quick ratio.

• Return on assets.

• Inventory turnover.

• Capital asset turnover.

Which of the following is an asset utilization ratio?

• Profit margin.

• Inventory turnover.

• Return on equity.

• Return on assets.

Which of the following is not a debt utilization ratio?

• Debt to total assets.

• Times interest earned.

• Current ratio.

• Fixed charge coverage.