verified answers
(also called efficiency ratios) measure how well the company uses its assets to
generate sales or cash—the firm's operational efficiency and profitability.
Ans✓✓✓-Activity ratios
A company currently has a ratio of 1.5 but hopes to improve the ratio to 2 to align
more with the industry benchmark. To achieve this goal, costs were cut in
production through an investment in efficient equipment, and the company
achieved a higher profit margin. If this continues, you are certain that the firm will
achieve its goal in two years. What is this an example of? Ans✓✓✓-Progress
measurement
A firm has paid off its short-term loans more quickly in the past couple of years.
What might this trend indicate about the firm's financial ratios? Ans✓✓✓-Its
liquidity ratio is increasing.
An investment analyst is concerned about a construction company's ability to sell
its inventory to meet current obligations, because much of the inventory
(commercial buildings) it builds and sells takes longer than a year to construct.
Which ratio should this analyst use to consider the effect of the firm's inventory
on the firm's ability to meet current obligations? Ans✓✓✓-quick ratio
An investment analyst is concerned about a construction company's ability to sell
its inventory to meet current obligations, because much of the inventory
(commercial buildings) it builds and sells takes longer than a year to construct.
Which ratio should this analyst use to consider the effect of the firm's inventory
on the firm's ability to meet current obligations? Ans✓✓✓-Quick ratio
, Another name for debt or liability Ans✓✓✓-Leverage
are used to evaluate the current share price of a public firm's stock. Ans✓✓✓-
Market ratios
As an active investor, Maria is analyzing her portfolio to decide if there are any
stocks she should remove from her pool of financial securities. A company she has
invested in, Quiet Flag Industries, just released its annual report.
Which kind of method should Maria use to see if the company has improved?
Ans✓✓✓-Trend analysis
Comparing a firm's financial ratios to other firms' ratios or industry averages.
Ans✓✓✓-Cross-sectional Analysis
Comparing a firm's ratios across time. Ans✓✓✓-Trend Analysis
consider how the firm is financed. Ans✓✓✓-Leverage ratios
For what purpose are market ratios used? Ans✓✓✓-To evaluate the current
share price of a public firm's stock
helps analyze where changes in return on equity come from. Ans✓✓✓-The
DuPont framework