Ratio analysis involves analyzing financial statements to help appraise a firm's financial position and strength.

Bus fin ch.4 concept

Quiz
•
Financial Education
•
12th Grade
•
Medium
Thanagid Chaichayanon
Used 2+ times
FREE Resource
83 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
True
False
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
The current and quick ratios both help us measure a firm's liquidity. The current ratio measures the relationship of the firm's current assets to its current liabilities, while the quick ratio measures the firm's ability to pay off short-term obligations without relying on the sale of inventories.
True
False
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Although a full liquidity analysis requires the use of a cash budget, the current and quick ratios provide fast and easy-to-use estimates of a firm's liquidity position.
True
False
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
High current and quick ratios always indicate that the firm is managing its liquidity position well.
True
False
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If a firm sold some inventory for cash and left the funds in its bank account, its current ratio would probably not change much, but its quick ratio would decline.
True
False
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If a firm sold some inventory on credit, its current ratio would probably not change much, but its quick ratio would increase.
True
False
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If a firm sold some inventory on credit as opposed to cash, there is no reason to think that either its current or quick ratio would change.
True
False
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