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Lecture 4 Quiz - Financial Statement Analysis

Authored by Lianne Lee

Social Studies

University

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Lecture 4 Quiz - Financial Statement Analysis
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8 questions

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1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following stakeholder care most about a company's current ratio?

Its shareholders

Its suppliers

Its competitors

Its customers

Answer explanation

Current ratio measures the company's ability to repay short-term debt with its short-term assets. Its important to suppliers because they want to be paid on time.

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

2. Which of the following companies is most likely to have the highest inventory turnover?

Subway, a fast food company

Books-A-Million, a bookstore chain

Whole Foods, a grocery chain

British Airways, an airline

Answer explanation

High inventory turnover measures how fast a company sells its inventory. Food companies typically sell out inventory fastest.

Other companies have nonfood items (e.g. grocery stores has nonfood items)

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which supplier of funds bears the greatest risk and should earn the greatest return?

Bondholder

Banks

Common shareholders

Preferred shareholders

Answer explanation

The suppliers that has the most to lose should earn the greatest return.

Common shareholders may get nothing if the company goes bankrupt

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Market value ratios indicate

whether the firm is using its asset productively

whether the firm is liquid

whether the firm is profitable

how highly the firm is valued by investors

Answer explanation

Compared to other ratios, market value ratios considers a company's potential

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When a firm improves (decreases) its days of inventory, it generally

requires additional cash investment in inventory

releases cash locked up in inventory

does not alter its cash position

cannot reduce its inventories

Answer explanation

The faster a firm sell off its inventories, the quicker they collect money.

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

True of False: Financial ratios can help you ask the right questions but they rarely answer these questions on their own

True

False

Answer explanation

Financial ratios provides numeric information but no reasons behind these numbers.

For example, if profit margin is -4%, it does not explain why a decline in profit is happening

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

True or False: When a firm improves (increases) its average collection period, it improves the firm's liquidity position

True

False

Answer explanation

False. The faster a firm collect cash from sales (decrease in accounts receivable), the more cash will be available to the firm to pay its current liabilities

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