6. A relatively liquid firm will have a. Low inventory turnover and number of da
ID: 2809096 • Letter: 6
Question
6. A relatively liquid firm will have
a. Low inventory turnover and number of days in inventory and a high accounts receivable turnover and days in accounts receivable.
b. A high inventory and accounts receivable turnover ratios and a low number of days in inventory and accounts receivable
c. High inventory and accounts receivable turnover ratios and a high number of days in inventory and accounts receivable
d. A high inventory turnover and number of days in inventory and a low accounts receivable turnover and days in accounts receivable
7. Profit margin times asset turnover provides
a. Earnings coverage
b. Current ratio
c. Return on assets
d. Price-to-earnings ratio
8. If a firm’s debt-to-equity ratio has increased over time then
a. The amount of debt must have decreased over time
b. The amount of debt must have increased over time
c. The amount of debt used to finance assets relative to the amount of equity used to finance assets must have decreased over time
d. The amount of debt used to finance assets relative to the amount of equity used to finance assets must have increased over time
9. The objective of which component of analysis is to analyze a firm’s ability to pay maturing obligations in a timely manner without tying up too much capital in current assets
a. Profitability analysis
b.Liquidity analysis
c. Inventory analysis
d. Solvency analysis
10. What is the target ratio value for asset turnover
a. Approximately one
b. Higher the better
c. Lower the better
d. Constant over time
Explanation / Answer
6. b. A high inventory and accounts receivable turnover ratios and a low number of days in inventory and accounts receivable
7.
c. Return on assets
8.
d. The amount of debt used to finance assets relative to the amount of equity used to finance assets must have increased over time
9.
b.Liquidity analysis
10.
b. Higher the better
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