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A firm has current assets of $100,000 and total assets of $300,000. The firm's sales are $900,000. The firm's fixed asset turnover is


A) 4.5x
B) 12.0x
C) 2.4x
D) 5.0x

E) B) and D)
F) All of the above

Correct Answer

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Times interest earned is an example of a profitability ratio.

A) True
B) False

Correct Answer

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Refer to the figure above. What is Marni's total asset turnover?


A) 13.3x
B) 4x
C) 1x
D) 2x

E) A) and B)
F) A) and D)

Correct Answer

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Asset utilization ratios can be used to measure the effectiveness of a firm's managers.

A) True
B) False

Correct Answer

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Refer to the figure above. What is Megaframe Computer's total asset turnover?


A) 4.50x
B) 3.6x
C) 2x
D) 1.94x

E) B) and C)
F) B) and D)

Correct Answer

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Match the following with the items below:

Premises
A system that includes inventory into cost of goods sold in which the items purchased first are written off first.
A system of including inventory into cost of goods sold in which the items purchased last are written off first.
A group of ratios that indicate to what extent a firm has borrowed funds and how prudently these funds are being managed.
analysis of performance over a number of years that is made to ascertain significant
Costs incurred if the present asset base were repurchased at current prices.
Ratios that measure the firm's ability to pay off short-term obligations as they come due.
A result of an inflationary economy in which old stocks of goods are sold at large
Ratios that measure the speed at which the firm is turning over its assets.
Measures the firm's ability to meet all fixed obligations.
The ratios that measure return on sales, assets and invested capital of the firm.
A method of study that breaks down return on assets between the profit margin and asset turnover.
Indicates the strength of the firm regarding its coverage of interest payments.
A phantom source of profit that can mislead even the most alert analysts.
Responses
DuPont System of ratio analysis
profitability ratios
debt utilization ratios
FIFO
inflation
times interest earned
trend analysis
LIFO
fixed charge coverage
inventory profits
replacement costs
asset utilization ratios
liquidity ratios

Correct Answer

A system that includes inventory into cost of goods sold in which the items purchased first are written off first.
A system of including inventory into cost of goods sold in which the items purchased last are written off first.
A group of ratios that indicate to what extent a firm has borrowed funds and how prudently these funds are being managed.
analysis of performance over a number of years that is made to ascertain significant
Costs incurred if the present asset base were repurchased at current prices.
Ratios that measure the firm's ability to pay off short-term obligations as they come due.
A result of an inflationary economy in which old stocks of goods are sold at large
Ratios that measure the speed at which the firm is turning over its assets.
Measures the firm's ability to meet all fixed obligations.
The ratios that measure return on sales, assets and invested capital of the firm.
A method of study that breaks down return on assets between the profit margin and asset turnover.
Indicates the strength of the firm regarding its coverage of interest payments.
A phantom source of profit that can mislead even the most alert analysts.

Refer to the figure above. The firm's receivable turnover is


A) 10x
B) 8x
C) 20x
D) 12x

E) None of the above
F) A) and B)

Correct Answer

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A firm's long term assets = $100,000, total assets = $400,000, inventory = $50,000 and current liabilities = $200,000.


A) current ratio = 0.5; quick ratio = 1.25
B) current ratio = 1.0; quick ratio = 2.0
C) current ratio = 1.5; quick ratio = 1.25
D) current ratio = 2.5; quick ratio = 2.0

E) B) and D)
F) All of the above

Correct Answer

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Refer to the figure above. Compute Marni's after tax profit margin.


A) 7.5%
B) 3.75%
C) 50%
D) None of these.

E) B) and C)
F) C) and D)

Correct Answer

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Refer to the figure above. Times interest earned for Tew Company is


A) 6.8x
B) 10.5x
C) 25x
D) 11.5x

E) A) and D)
F) A) and C)

Correct Answer

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A large extraordinary loss has what effect on cost of goods sold?


A) Raises it
B) Lowers it
C) Has no effect
D) Need more information

E) A) and B)
F) A) and C)

Correct Answer

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Financial ratios are used to weigh and evaluate the operational performance of the firm.

A) True
B) False

Correct Answer

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Refer to the figure above. Fixed Charge coverage for Tew Company is


A) 23x
B) 13.6x
C) 1.3x
D) 8.0x

E) A) and B)
F) None of the above

Correct Answer

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Fiercely competitive industries such as the computer industry have had lower profit margins and return on equity in recent years even though they are under extreme pressure to maintain high profitability.

A) True
B) False

Correct Answer

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Profitability ratios are distorted by inflation because profits are stated in current dollars and assets and equity are stated in historical dollars.

A) True
B) False

Correct Answer

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Income can be distorted by factors other than inflation. The most important causes of distortion for inter-industry comparisons are:


A) timing of revenue receipts and nonrecurring gains or losses.
B) tax write-off policy and use of different inventory methods.
C) All of these.
D) None of these.

E) C) and D)
F) B) and D)

Correct Answer

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Asset utilization ratios measure the returns on various assets such as return on total assets.

A) True
B) False

Correct Answer

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Liquidity ratios indicate how fast a firm can generate cash to pay bills.

A) True
B) False

Correct Answer

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Ratios are not distorted by inflation.

A) True
B) False

Correct Answer

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A short-term creditor would be most interested in


A) profitability ratios.
B) asset utilization ratios.
C) liquidity ratios.
D) debt utilization ratios.

E) A) and B)
F) B) and C)

Correct Answer

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Showing 41 - 60 of 127

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