Question 1

A company has a debt to assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a true statement?

Accepted Answer

A)  The debt to assets ratio will be unchanged.
B)  The debt to assets ratio will increase.
C)  The debt to assets ratio will decrease.
D)  The debt to assets ratio will increase as a result of the cash received and then decrease as a result of the building acquisition.

Question 2

Which of the following ratios is calculated by dividing current assets by current liabilities?

Accepted Answer

A)  Quick ratio.
B)  Solvency ratio.
C)  Debt ratio.
D)  Current ratio.

Question 3

If an analyst wants to examine a company's short-run ability to survive,which of the following would best be considered?

Accepted Answer

A)  Liquidity.
B)  Market share.
C)  Profitability.
D)  Solvency.

Question 4

The following information is available for a company for the current year: Use the information above to answer the following question.Which of the following is closest to the fixed asset turnover ratio?

Accepted Answer

A)  2.65
B)  1.72
C)  4.25
D)  3.80

Question 5

The debt-to-assets ratio is the:

Accepted Answer

A)  ratio of current liabilities to current assets.
B)  ratio of long term liabilities to fixed assets.
C)  ratio of total liabilities to total assets.
D)  proportion of short-term liabilities to total liabilities.

Question 6

Which of the following ratios is calculated by dividing liquid assets by current liabilities?

Accepted Answer

A)  Current ratio.
B)  Quick ratio.
C)  Turnover ratio.
D)  Working capital ratio.

Question 7

A company has a current ratio of 2.0 and a quick ratio of 1.4.If the company then collects an accounts receivable,which of the following is a true statement?

Accepted Answer

A)  The current ratio will not change and the quick ratio will increase.
B)  The current ratio will increase and the quick ratio will increase.
C)  The current ratio and the quick ratio will not change.
D)  The current ratio will increase and the quick ratio will decrease.

Question 8

A company's comparative balance sheet show total assets for 2015 and 2014 as $990,000 and $900,000,respectively.What is the percentage change to be reported in the horizontal analysis?

Accepted Answer

A)  Increase of 10%
B)  Increase of 9%
C)  Increase of 5%
D)  Increase of 4%

Question 9

Which of the following statements regarding liquidity and solvency ratios is true?

Accepted Answer

A)  Unlike solvency ratios,liquidity ratios relate to the company's long-run survival.
B)  Both liquidity ratios and solvency ratios measure a company's ability to meet its financial obligations.
C)  Liquidity ratios include the return on equity ratio and the times interest earned ratio.
D)  Solvency ratios include the current ratio and the net profit margin ratio.

Question 10

Which of the following is a liquidity ratio?

Accepted Answer

A)  Inventory turnover.
B)  Price earnings (P/
E)  .
C)  Net profit margin.
D)  Times interest earneD.Liquidity ratios measure the company's ability to use current assets to pay its current obligations as they become due.Inventory turnover is one of the liquidity ratios.P/E and net profit margin are profitability ratios.

Question 11

Benchmarks are required to evaluate a company's performance.Benchmarks are necessary when interpreting a company's financial ratios.These benchmarks may be the company's own results for prior years,the results of competitors,or an average for the industry.

Accepted Answer

A) True 
 B)False

Question 12

The higher the times interest earned ratio,the greater the risk of nonpayment of interest.The higher the times interest earned ratio,the better able the company is to meet its interest obligations.

Accepted Answer

A) True 
 B)False

Question 13

Liquidity measures the ability of a company to meet its current financial obligations.Liquidity relates to a company's ability to survive in the short term by converting assets to cash that can be used to pay current liabilities as they come due.Ratios used to measure liquidity include the receivable turnover,the inventory turnover,the current ratio,and the quick ratio.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following measures would assist in assessing the solvency of a company?

Accepted Answer

A)  Debt-to-assets ratio.
B)  Fixed asset turnover ratio.
C)  Return on equity ratio.
D)  Quick ratio.

Question 15

A company has a current ratio of 2.0 and a quick ratio of 1.5.Assume the company then paid previously declared dividends in the amount of $20,000.Which of the following statements is true?

Accepted Answer

A)  The current ratio will decrease and the quick ratio will decrease.
B)  The current ratio will decrease and the quick ratio will not change.
C)  The current ratio and the quick ratio will not change.
D)  The current ratio will increase and the quick ratio will increase.

Question 16

The ratio that measures the company's ability to meet required interest payments is the:

Accepted Answer

A)  Debt to equity ratio.
B)  Current ratio.
C)  Price/earnings ratio.
D)  Times interest earned ratio.

Question 17

The ratio that measures how many times a company replenishes its inventory in a year is the:

Accepted Answer

A)  Days to sell.
B)  Accounts receivable turnover ratio.
C)  Inventory turnover ratio.
D)  Days to collect ratio.

Question 18

Which of the following ratios is a solvency ratio?

Accepted Answer

A)  Net profit margin ratio.
B)  Current ratio.
C)  Asset turnover ratio.
D)  Debt to assets ratio.

Question 19

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Accepted Answer

A)  Net profit margin ratio.
B)  Current ratio.
C)  Inventory turnover ratio.
D)  Asset turnover ratio.

Question 20

Which of the following is calculated by dividing net income by average total stockholders' equity?

Accepted Answer

A)  Return on assets ratio.
B)  Return on equity ratio.
C)  Earnings per share.
D)  Net profit margin ratio.

Exam 13: Measuring and Evaluating Financial Performance

If an analyst wants to examine a company's short-run ability to survive,which of the following would best be considered?

Correct Answer
verified

The ratio that measures how many times a company replenishes its inventory in a year is the:

Correct Answer
verified

Which of the following measures would assist in assessing the solvency of a company?

Correct Answer
verified

Benchmarks are required to evaluate a company's performance.Benchmarks are necessary when interpreting a company's financial ratios.These benchmarks may be the company's own results for prior years,the results of competitors,or an average for the industry.

Correct Answer
verified

A company's comparative balance sheet show total assets for 2015 and 2014 as $990,000 and $900,000,respectively.What is the percentage change to be reported in the horizontal analysis?

Correct Answer
verified

Which of the following ratios is a solvency ratio?

Correct Answer
verified

A company has a current ratio of 2.0 and a quick ratio of 1.5.Assume the company then paid previously declared dividends in the amount of $20,000.Which of the following statements is true?

Correct Answer
verified

Which of the following ratios is calculated by dividing current assets by current liabilities?

Correct Answer
verified

Which of the following statements regarding liquidity and solvency ratios is true?

Correct Answer
verified

A company has a debt to assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a true statement?

Correct Answer
verified

Which of the following ratios is calculated by dividing liquid assets by current liabilities?

Correct Answer
verified

A company has a current ratio of 2.0 and a quick ratio of 1.4.If the company then collects an accounts receivable,which of the following is a true statement?

Correct Answer
verified

The following information is available for a company for the current year: Use the information above to answer the following question.Which of the following is closest to the fixed asset turnover ratio?

Correct Answer
verified

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Correct Answer
verified

The higher the times interest earned ratio,the greater the risk of nonpayment of interest.The higher the times interest earned ratio,the better able the company is to meet its interest obligations.

Correct Answer
verified

The debt-to-assets ratio is the:

Correct Answer
verified

The ratio that measures the company's ability to meet required interest payments is the:

Correct Answer
verified

Which of the following is a liquidity ratio?

Correct Answer
verified

Which of the following is calculated by dividing net income by average total stockholders' equity?

Correct Answer
verified

Correct Answer
verified

Exam 13: Measuring and Evaluating Financial Performance

If an analyst wants to examine a company's short-run ability to survive,which of the following would best be considered?

Correct AnswerverifiedShow Answer

The ratio that measures how many times a company replenishes its inventory in a year is the:

Correct AnswerverifiedShow Answer

Which of the following measures would assist in assessing the solvency of a company?

Correct AnswerverifiedShow Answer

Benchmarks are required to evaluate a company's performance.Benchmarks are necessary when interpreting a company's financial ratios.These benchmarks may be the company's own results for prior years,the results of competitors,or an average for the industry.

Correct AnswerverifiedShow Answer

A company's comparative balance sheet show total assets for 2015 and 2014 as $990,000 and $900,000,respectively.What is the percentage change to be reported in the horizontal analysis?

Correct AnswerverifiedShow Answer

Which of the following ratios is a solvency ratio?

Correct AnswerverifiedShow Answer

A company has a current ratio of 2.0 and a quick ratio of 1.5.Assume the company then paid previously declared dividends in the amount of $20,000.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Which of the following ratios is calculated by dividing current assets by current liabilities?

Correct AnswerverifiedShow Answer

Which of the following statements regarding liquidity and solvency ratios is true?

Correct AnswerverifiedShow Answer

A company has a debt to assets ratio of 0.45.If the company then borrows cash from the bank to finance a building acquisition,which of the following is a true statement?

Correct AnswerverifiedShow Answer

Which of the following ratios is calculated by dividing liquid assets by current liabilities?

Correct AnswerverifiedShow Answer

A company has a current ratio of 2.0 and a quick ratio of 1.4.If the company then collects an accounts receivable,which of the following is a true statement?

Correct AnswerverifiedShow Answer

The following information is available for a company for the current year: Use the information above to answer the following question.Which of the following is closest to the fixed asset turnover ratio?

Correct AnswerverifiedShow Answer

Cost of goods sold divided by average inventory is the calculation for which of the following ratios?

Correct AnswerverifiedShow Answer

The higher the times interest earned ratio,the greater the risk of nonpayment of interest.The higher the times interest earned ratio,the better able the company is to meet its interest obligations.

Correct AnswerverifiedShow Answer

The debt-to-assets ratio is the:

Correct AnswerverifiedShow Answer

The ratio that measures the company's ability to meet required interest payments is the:

Correct AnswerverifiedShow Answer

Which of the following is a liquidity ratio?

Correct AnswerverifiedShow Answer

Which of the following is calculated by dividing net income by average total stockholders' equity?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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