Answer Options:
a. True
b. False
Answer: a. True
Question: The inventory turnover ratio and days sales outstanding (DSO) are two ratios that are used to assess how effectively a firm is managing its current assets.
Answer Options:
a. True
b. False
Answer: a. True
Question: The price/earnings (P/E) ratio tells us how much investors are willing to pay for a dollar of current earnings. In general, investors regard companies with higher P/E ratios as being less risky and/or more likely to enjoy higher growth in the future.
Answer Options:
a. True
b. False
Answer: a. True
Question: The “apparent,” but not necessarily the “true,” financial position of a company whose sales are seasonal can change dramatically during a given year, depending on the time of year when the financial statements are constructed. a. True b. False
Answer: a. True
Question: The annual report contains four basic financial statements: the income statement, the balance sheet, the cash flow statement, and statement of stockholders’ equity.
Answer Options:
a. True
b. False
Answer: a. True
Question: The operating margin measures operating income per dollar of assets. a. True b. False
Answer: b. False
Question: If a firm sold some inventory on credit as opposed to cash, there is no reason to think that either its current or quick ratio would change.
Answer Options:
a. True
b. False
Answer: b. False
Question: A congeneric merger is one where the merging firms operate in related businesses but do not necessarily produce the same products or have a producer-supplier relationship. a. True b. False
Answer: True
Question: The “apparent,” but not necessarily the “true,” financial position of a company whose sales are seasonal can change dramatically during a given year, depending on the time of year when the financial statements are constructed. Answer Options a. True b. False
Answer: a. True
Question: Consider the following balance sheet for Games Inc. Because Games has $800,000 of retained earnings, we know that the company would be able to pay cash to buy an asset with a cost of $200,000.
Answer Options:
a. True
b. False
Answer: b. False
Question: The days sales outstanding tells us how long it takes, on average, to collect after a sale is made. The DSO can be compared with the firm’s credit terms to get an idea of whether customers are paying on time. a. True b. False
Answer: a. True
Question: The days sales outstanding tells us how long it takes, on average, to collect after a sale is made. The DSO can be compared with the firm’s credit terms to get an idea of whether customers are paying on time.
Answer Options:
a. True
b. False
Answer: a. True
Question: The profit margin measures net income per dollar of sales. a. True b. False
Answer: a. True
Question: If a petrochemical firm that used oil as feedstock merged with an oil producer that had large oil reserves and a drilling subsidiary, this would be a vertical merger. a. True b. False
Answer: True
Question: The basic earning power ratio (BEP) reflects the earning power of a firm’s assets after giving consideration to financial leverage and tax effects. Answer Options a. True b. False
Answer: a. True
Question: Significant variations in accounting methods among firms make meaningful ratio comparisons between firms more difficult than if all firms used the same or similar accounting methods. a. True b. False
Answer: a. True
Question: Other things held constant, the more debt a firm uses, the lower its return on total assets will be.
Answer Options:
a. True
b. False
Answer: a. True