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Chapter 13 Financial Statement Analysis Solutions

The document contains 15 multiple choice questions about financial ratios. These questions assess knowledge on five key areas that financial ratios concentrate on: liquidity, profitability, debt, efficiency, and market related factors. The questions also address specific financial ratios like the current ratio, quick ratio, return on assets, debt to equity ratio, and price to earnings ratio. They define ratios, identify what they measure, and calculate various ratios based on financial data.

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2K views3 pages

Chapter 13 Financial Statement Analysis Solutions

The document contains 15 multiple choice questions about financial ratios. These questions assess knowledge on five key areas that financial ratios concentrate on: liquidity, profitability, debt, efficiency, and market related factors. The questions also address specific financial ratios like the current ratio, quick ratio, return on assets, debt to equity ratio, and price to earnings ratio. They define ratios, identify what they measure, and calculate various ratios based on financial data.

Uploaded by

bhardwajvn
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Question 1 Five areas that financial ratios concentrate on are: a) b) c) d) e) liquidity, profitability, debt, efficiency, market related; profitability,

strategy, liquidity, auditing, share prices; liquidity, current ratio, quick ratio, interest cover, dividend cover; market related, share prices, dividend policy, debt policy, strategy; none of the above.

Question 2 Ratios that measure the ability of the company to pay its short-term debts are called: a) b) c) d) e) debt ratios; cover ratios; liquidity ratios; profitability ratios; none of the above.

Question 3 Current assets divided by current liabilities is the definition of the: a) b) c) d) e) interest cover ratio; dividend cover ratio; quick ratio; current ratio; none of the above.

Question 4 The quick ratio is defined as: a) b) c) d) e) current assets divided by current liabilities; current assets divided by total debt; current assets less inventory, divided by total liabilities; current assets less inventory, divided by current liabilities; none of the above.

Question 5 Return on sales, return on assets and return on equity are examples of: a) b) c) d) e) liquidity ratios; profitability ratios; debt ratios; efficiency ratios; market-related ratios.

Question 6 Return on assets is defined as: a) operating income divided by owners equity; b) operating income divided by sales; c) operating income divided by total assets; d) operating income divided by long-term assets plus debt; e) none of the above. Question 7 Net income divided by shareholders equity is the definition of: a) b) c) d) e) return on sales; return on assets; return on equity; asset turnover; none of the above.

Question 8 The debt to equity ratio measures; a) b) c) d) e) the likelihood of the company going bankrupt in the short term; the efficiency of the company; the relative proportions of debt and equity in the capital structure; liquidity; none of the above.

Question 9 The interest cover ratio measures: a) b) c) d) e) the leverage of the company; the efficiency of debt; the weighted average cost of capital; the relationship between interest and profit; none of the above.

Question 10 Total asset turnover, receivables turnover and inventory turnover ratios measure: a) b) c) d) e) liquidity; profitability; efficiency; debt; market related factors.

Question 11 The receivables turnover ratio is defined as: a) b) c) d) e) sales divided by receivables; receivables divided by sales; receivables divided by one days sales; receivables plus bad debt allowances. none of the above.

Question12 To measure the efficiency with which inventory is used the following ratio should be used: a) b) c) d) e) inventory turnover ratio; inventory holding period; lower of cost or market valuation of inventory; a or b, but not c; a, b or c.

Question 13 Earnings per share is affected by: a) b) c) d) e) net income; number of shares; dividends; a & b, but not c; a, b & c.

Question 14 The price to earnings ratio measures: a) b) c) d) e) the rationality of the stock market; the liquidity of the company; the publics perception of the company; the ethics of the company; none of the above.

Question 15 The dividend cover ratio is defined as: a) b) c) d) e) dividend divided by net income; dividend less interest paid and taxes; operating income divided by dividend; net income divided by dividend; none of the above.

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