Question

Question 1

Ratios are grouped into 4 categories: Profitability, asset utilization, performance and debt utilization.

True

False

8 points

Question 2

The calculation for profit margin is: net income divided by [______].

8 points

Question 3

Calculation of profit margin, return on assets (investments) and return on equity are "profitability ratios."

True False

8 points

Question 4

The calculation for return on equity is: Net Income duvided by [ _____ ]. (please put answer in all lower case, no caps).

8 points

Question 5

Return on total assets as described through the 2 components of profit margin and asset turnover is part of the Du Pont system of analysis.

True False

8 points

Question 6

When evaluating the Times Interest and Fixed Charge ratios a higher number indicates a weaker ability of the firm to meet its obligations.

True False

8 points

Question 7

Ratios are used to weigh and evaluate the operating performance of the firm by comparing the firm's results against:

a. Similar firms in our industry;

b. Our own past performance;

c. Government forecasts;

d. Published industry data.

	1.	All of these
	2.	a. Similar firms in our industry; b. Our own past performance; d. Published industry data.
	3.	a. Similar firms in our industry; b. Our own past performance; c. Government forecasts;
	4.	None of these

8 points

Question 8

Trend analysis is unnecessary because ratio analysis presents an accurate picture of the firm even though the business cycle, sales and profitability may expand and contract.

True False

8 points

Question 9

LIFO and FIFO are 2 common methods of inventory valuation.

True False

8 points

Question 10

When sales are recognized, issues of inflation and deflation, presence of extraordinary gains and losses are some of the factors that may distort the numbers reported.

True False