D076 - Finance Skills for Managers
Unit 4 Question and answers verified
to pass 2025/2026
4 Reasons Ratios are Useful - correct answer ✔1 - Standardization
2 - Flexibility
3 - Focus
4 - Evaluation
Benchmarking - correct answer ✔The process of completing a financial analysis and comparing a firm's
performance to that of other similar firms.
Trend Analysis - correct answer ✔Comparing a firm's ratios across time
Cross-Sectional Analysis - correct answer ✔Compares a firm's financial ratios to other firms' ratios or
industry averages
Seasonal Firms - correct answer ✔Firms whose performance varies according to the season.
Which statement below is an example of how ratios are used in the field of finance?
- A firm's ratios are compared with those of a benchmark peer group to determine the firm's relative
strength and performance.
- Ratio analysis is performed based on a strict set of rules governed by generally accepted accounting
principles.
- A firm's ratios may vary year over year, so they are not helpful for evaluating whether firm goals are
met.
, - Ratios are helpful only when comparing companies that are the same size and that use the same
operational style. - correct answer ✔A firm's ratios are compared with those of a benchmark peer
group to determine the firm's relative strength and performance.
Why are ratios considered flexible? - correct answer ✔Because they are not regulated and can be
changed or invented according to a firm's needs
How might calculating financial ratios help shareholders? - correct answer ✔Ratios can be used to
determine whether a firm is maximizing shareholder wealth.
The firm Betsy's Books conducts a financial analysis using ratios to know how it is performing in
comparison to other similar firms. What is this process called? - correct answer ✔Benchmarking
5 Major Categories of Ratios - correct answer ✔1 - Liquidity
2- Activity
3 - Leverage
4 - Profitability
5 - Market
Liquidity Ratios - correct answer ✔measure a firm's ability to meet short-term obligations and include
the current ratio and quick ratio.
Activity Ratios - correct answer ✔AKA Efficiency ratios; measure how well the company uses its assets
to generate sales or cash -- the firm's operational efficiency and profitablilty.
Leverage Ratios - correct answer ✔A category of ratios that consider how a firm is financed, aka
financing ratios or solvency ratios.
Unit 4 Question and answers verified
to pass 2025/2026
4 Reasons Ratios are Useful - correct answer ✔1 - Standardization
2 - Flexibility
3 - Focus
4 - Evaluation
Benchmarking - correct answer ✔The process of completing a financial analysis and comparing a firm's
performance to that of other similar firms.
Trend Analysis - correct answer ✔Comparing a firm's ratios across time
Cross-Sectional Analysis - correct answer ✔Compares a firm's financial ratios to other firms' ratios or
industry averages
Seasonal Firms - correct answer ✔Firms whose performance varies according to the season.
Which statement below is an example of how ratios are used in the field of finance?
- A firm's ratios are compared with those of a benchmark peer group to determine the firm's relative
strength and performance.
- Ratio analysis is performed based on a strict set of rules governed by generally accepted accounting
principles.
- A firm's ratios may vary year over year, so they are not helpful for evaluating whether firm goals are
met.
, - Ratios are helpful only when comparing companies that are the same size and that use the same
operational style. - correct answer ✔A firm's ratios are compared with those of a benchmark peer
group to determine the firm's relative strength and performance.
Why are ratios considered flexible? - correct answer ✔Because they are not regulated and can be
changed or invented according to a firm's needs
How might calculating financial ratios help shareholders? - correct answer ✔Ratios can be used to
determine whether a firm is maximizing shareholder wealth.
The firm Betsy's Books conducts a financial analysis using ratios to know how it is performing in
comparison to other similar firms. What is this process called? - correct answer ✔Benchmarking
5 Major Categories of Ratios - correct answer ✔1 - Liquidity
2- Activity
3 - Leverage
4 - Profitability
5 - Market
Liquidity Ratios - correct answer ✔measure a firm's ability to meet short-term obligations and include
the current ratio and quick ratio.
Activity Ratios - correct answer ✔AKA Efficiency ratios; measure how well the company uses its assets
to generate sales or cash -- the firm's operational efficiency and profitablilty.
Leverage Ratios - correct answer ✔A category of ratios that consider how a firm is financed, aka
financing ratios or solvency ratios.
