WGU D076 Module 7 questions with verified answers
5 major types of financial ratios Ans✓✓✓-liquidity, activity, leverage,
profitability, and market
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.
Accounts Receivable turnover, average collection period, inventory turnover, total
asset turnover, and operating income return on investment. Ans✓✓✓-Activity
ratios
Activity Ratios Ans✓✓✓-measure how well a company uses its assets to generate
sales or cash
Activity ratios such as inventory turnover, accounts receivable (AR) turnover, and
average collection period (ACP) are used to Ans✓✓✓-check short-term operating
asset management efficiency, while total asset turnover (TAT), fixed asset
turnover (FAT), and operating income return on investment (OIROI) assess how
well a firm is using its assets to generate sales.
Both the market-to-book (M/B) and price-to-earnings (P/E) ratios are used to
Ans✓✓✓-Both the market-to-book (M/B) and price-to-earnings (P/E) ratios are
used to
Current and quick ratios are different because Ans✓✓✓-of potential illiquidity of
inventory, and they are compared with liquidity ratios to assess how well a firm
can meet short-term obligations.
5 major types of financial ratios Ans✓✓✓-liquidity, activity, leverage,
profitability, and market
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.
Accounts Receivable turnover, average collection period, inventory turnover, total
asset turnover, and operating income return on investment. Ans✓✓✓-Activity
ratios
Activity Ratios Ans✓✓✓-measure how well a company uses its assets to generate
sales or cash
Activity ratios such as inventory turnover, accounts receivable (AR) turnover, and
average collection period (ACP) are used to Ans✓✓✓-check short-term operating
asset management efficiency, while total asset turnover (TAT), fixed asset
turnover (FAT), and operating income return on investment (OIROI) assess how
well a firm is using its assets to generate sales.
Both the market-to-book (M/B) and price-to-earnings (P/E) ratios are used to
Ans✓✓✓-Both the market-to-book (M/B) and price-to-earnings (P/E) ratios are
used to
Current and quick ratios are different because Ans✓✓✓-of potential illiquidity of
inventory, and they are compared with liquidity ratios to assess how well a firm
can meet short-term obligations.
