HFT 3424 final exam questions with
correct answers rated A+
a method of analyzing financial statements by comparisons of related facts - correct answer
✔✔ratio analysis
measures efficiency of day to day operations. - correct answer ✔✔activity and operating ratios
measure the effectiveness of the management. - correct answer ✔✔profitability ratios
measures the ability to meet short term obligations. - correct answer ✔✔liquidity ratios
measures the extent of the business financed by debt and its ability to meet long term
obligations. - correct answer ✔✔solvency ratios
If overall costs and inflation are increasing, then you should see a corresponding increase in
sales. - correct answer ✔✔sales growth
How much money are you making per every $ of sales. This ratio measures your ability to cover
all operating costs including indirect costs. - correct answer ✔✔net profit margin
How much profit is earned on your products without considering indirect costs - correct answer
✔✔gross profit margin
ratio that measures the effectiveness of management's use of the organization's assets. -->
measures the ability to turn assets into profit
, *A low ratio compared to industry may mean that your competitors have found a way to
operate more efficiently. - correct answer ✔✔return on assets
this ratio measures the effectiveness of management's use of equity funds. - correct answer
✔✔return on equity
the ratio of current assets to current liabilities. It is also expressed as how many times the assets
can cover the liabilities.
*Rule of thumb for all businesses is 2:1. - correct answer ✔✔current ratio
ratio where current assets are replaced by quick assets. - correct answer ✔✔quick ratio
ratio that compares the working capital to the revenue of the business.It indicates a company's
effectiveness in using its working capital. - correct answer ✔✔working capital turnover ratio
ratio that measures the rapidity of converting accounts receivable to cash. The higher the speed
of conversion or turnover rate, the current ratio and the quick-ratio will have more credibility.
*owners or managers like to see HIGH turnover rate - correct answer ✔✔accounts receivable
turnover
This ratio measures the level of debt financing in the business. - correct answer ✔✔Total
Liabilities to Total Assets Ratio
this ratio compares the level of debt versus equity financing. - correct answer ✔✔debt to equity
ratio
The process of forecasting future expenses and savings - correct answer ✔✔budget planning
correct answers rated A+
a method of analyzing financial statements by comparisons of related facts - correct answer
✔✔ratio analysis
measures efficiency of day to day operations. - correct answer ✔✔activity and operating ratios
measure the effectiveness of the management. - correct answer ✔✔profitability ratios
measures the ability to meet short term obligations. - correct answer ✔✔liquidity ratios
measures the extent of the business financed by debt and its ability to meet long term
obligations. - correct answer ✔✔solvency ratios
If overall costs and inflation are increasing, then you should see a corresponding increase in
sales. - correct answer ✔✔sales growth
How much money are you making per every $ of sales. This ratio measures your ability to cover
all operating costs including indirect costs. - correct answer ✔✔net profit margin
How much profit is earned on your products without considering indirect costs - correct answer
✔✔gross profit margin
ratio that measures the effectiveness of management's use of the organization's assets. -->
measures the ability to turn assets into profit
, *A low ratio compared to industry may mean that your competitors have found a way to
operate more efficiently. - correct answer ✔✔return on assets
this ratio measures the effectiveness of management's use of equity funds. - correct answer
✔✔return on equity
the ratio of current assets to current liabilities. It is also expressed as how many times the assets
can cover the liabilities.
*Rule of thumb for all businesses is 2:1. - correct answer ✔✔current ratio
ratio where current assets are replaced by quick assets. - correct answer ✔✔quick ratio
ratio that compares the working capital to the revenue of the business.It indicates a company's
effectiveness in using its working capital. - correct answer ✔✔working capital turnover ratio
ratio that measures the rapidity of converting accounts receivable to cash. The higher the speed
of conversion or turnover rate, the current ratio and the quick-ratio will have more credibility.
*owners or managers like to see HIGH turnover rate - correct answer ✔✔accounts receivable
turnover
This ratio measures the level of debt financing in the business. - correct answer ✔✔Total
Liabilities to Total Assets Ratio
this ratio compares the level of debt versus equity financing. - correct answer ✔✔debt to equity
ratio
The process of forecasting future expenses and savings - correct answer ✔✔budget planning
