Business Administration - Accounting & Financial Planning FIN401 Study Guide - Quiz Guide: Inventory Turnover, Asset Turnover, Profit Margin

1. The formula for Accounts Receivable turnover is

Select one:

a. Net Sales / average accounts receivable

b. Cost of goods sold / average accounts receivable

c. Net Sales / average merchandise inventory

d. 360 days / average accounts receivable

2. The category of ratios that determine the economic status ofpublicly-traded companies is

Select one:

a. Profitability ratios

b. Market value ratios

c. Liquidity Ratios

d. Solvency ratios

3. The working capital ratio is

Select one:

a. Quick assets / current liabilities

b. Working capital /current liabilities

c. Current assets minus current liabilities

d. Current assets/current liabilities

4. Earnings per share is calculated by

Select one:

a. Dividing net income by the authorized ordinary shares.

b. Dividing net income less preferred dividends by number ofordinary shares outstanding.

c. None of the above.

d. Dividing net income by the total number of ordinary andpreferred shares issued.

5. Which of the following belong to the profitabilityratios?

Select one:

a. Rate of return on equity

b. Rate of return on assets

c. All of the above

d. Gross Profit Margin

6. The category of ratios that shows the ability of the firm topay its long-term obligations is

Select one:

a. Profitability ratios

b. Solvency ratios

c. Market value ratios

d. Liquidity Ratios

7. Operating profit margin equals

Select one:

a. Income from operations / sales

b. Net income / sales

c. Gross profit / sales

d. Profit from operations / cost of sales

8. The following are quick assets except

Select one:

a. Short-term investments

b. Merchandise Inventory

c. Accounts Receivable

d. Cash

9. The following are liquidity ratios except

Select one:

a. Earnings per share

b. Working capital ratio

c. Quick ratio

d. Receivable turnover

10. Quick assets equals

Select one:

a. All current assets

b. Cash and Accounts receivable only.

c. Total assets less non-current assets

d. Current assets minus inventory

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.

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

QUESTION 1

Determine the cost of sales for a firm with the following financial ratios and data:

Current ratio = 3.0; Quick ratio = 2.0; Current liabilities $1,000,000; Inventory turnover 6 times

8.3 points

QUESTION 2

What would be the times interest earned of a company, if its total interest charges are $20,000, sales are $220,000, and its net profit margin is 6 percent? Assume a tax rate of 40 percent.

8.3 points

QUESTION 3

A firm's current ratio is 1.5 and its quick ratio is 1.0. If its current liabilities are $10,000, what are its inventories?

8.3 points

QUESTION 4

If a firm wishes to retain the same return on equity when its net profit margin and total asset turnover has declined, it must

8.3 points

QUESTION 5

The sales-to-inventory ratio:

8.5 points

QUESTION 6

Primary sources of comparative financial data include

8.3 points

QUESTION 7

____ indicate the ability of the firm to meet its short-term financial obligations

8.3 points

QUESTION 8

If a firm’s common size income statement shows that the earnings after tax percentage is too low, the firm may have spent too much money:

8.3 points

QUESTION 9

The ____ ratio indicates the percentage of a firm's earnings that are distributed as dividends.

8.3 points

QUESTION 10

The work of the external independent auditor includes a letter that states that the financial information represents fairly the financial position of the company and that these statements were:

8.3 points

QUESTION 11

The greater the amount of financial leverage used by a firm, the greater its ____, all other things being equal.

8.3 points

QUESTION 12

The type of ratio that indicates the firm’s ability to provide adequate returns in the form of dividends and share price appreciation is:

8.5 points

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