Test Bank For Fundamentals Of Corporate Finance//Ltest
Update 2024-2025 Actual Q & A (100% Verified Correct)
The financial ratio days' sales in inventory is measured as:
A. inventory turnover plus 365 days.
B. inventory times 365 days.
C. inventory plus cost of goods sold, divided by 365 days.
D. 365 days divided by the inventory.
E. 365 days divided by the inventory turnover. - CORRECT ANSWERS-E
The receivables turnover ratio is measured as:
A. sales plus accounts receivable.
B. sales divided by accounts receivable.
C. sales minus accounts receivable, divided by sales.
D. accounts receivable times sales.
E. accounts receivable divided by sales. - CORRECT ANSWERS-B
The total asset turnover ratio measures the amount of:
A. total assets needed for every $1 of sales.
B. sales generated by every $1 in total assets.
C. fixed assets required for every $1 of sales.
D. net income generated by every $1 in total assets.
E. net income than can be generated by every $1 of fixed assets. - CORRECT
ANSWERS-B
Ratios that measure how efficiently a firm's management uses its assets and equity to
generate bottom line net income are known as _______ ratios.
A. asset management
B. long-term solvency
C. short-term solvency
D. profitability
E. market value - CORRECT ANSWERS-D
The financial ratio measured as net income divided by sales is known as the firm's:
A. profit margin.
B. return on assets.
C. return on equity.
D. asset turnover.
,E. earnings before interest and taxes. - CORRECT ANSWERS-A
The measure of net income returned from every dollar invested in total assets is the:
A. profit margin.
B. return on assets.
C. return on equity.
D. asset turnover.
E. earnings before interest and taxes. - CORRECT ANSWERS-B
The financial ratio that measures the accounting profit per dollar of book equity is
referred to as the:
A. profit margin.
B. price-earnings ratio.
C. return on equity.
D. equity turnover.
E. market profit-to-book ratio. - CORRECT ANSWERS-C
The amount that investors are willing to pay for each dollar of annual earnings is
reflected in the:
A. return on assets.
B. return on equity.
C. debt-equity ratio.
D. price-earnings ratio.
E. DuPont identity. - CORRECT ANSWERS-D
The market-to-book ratio is measured as the:
A. market price per share divided by the par value per share.
B. net income per share divided by the market price per share.
C. market price per share divided by the net income per share.
D. market price per share divided by the dividends per share.
E. market value per share divided by the book value per share. - CORRECT
ANSWERS-E
The external funds needed (EFN) equation projects the addition to retained earnings as:
A. PM × Δ Sales.
B. PM ×Δ Sales× (1 - d).
C. PM × Projected sales × (1 - d).
D. Projected sales × (1 - d).
E. PM ×Projected sales. - CORRECT ANSWERS-C
Which one of the following statements is correct concerning ratio analysis?
, A. A single ratio is often computed differently by different individuals.
B. Ratios do not address the problem of size differences among firms.
C. Only a very limited number of ratios can be used for analytical purposes.
D. Each ratio has a specific formula that is used consistently by all analysts.
E. Ratios cannot be used for comparison purposes over periods of time. - CORRECT
ANSWERS-A
Which one of the following is a liquidity ratio?
A. quick ratio
B. cash coverage ratio
C. total debt ratio
D. EV multiple
E. times interest earned ratio - CORRECT ANSWERS-A
An increase in which one of the following accounts increases a firm's current ratio
without affecting its quick ratio?
A. accounts payable
B. cash
C. inventory
D. accounts receivable
E. fixed assets - CORRECT ANSWERS-C
A supplier, who requires payment within ten days, should be most concerned with which
one of the following ratios when granting credit?
A. current
B. cash
C. debt-equity
D. quick
E. total debt - CORRECT ANSWERS-B
A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:
A. $1 in total equity.
B. $.53 in total assets.
C. $1 in current assets.
D. $.53 in total equity.
E. $1 in fixed assets. - CORRECT ANSWERS-D
The long-term debt ratio is probably of most interest to a firm's:
A. credit customers.
B. employees.
Update 2024-2025 Actual Q & A (100% Verified Correct)
The financial ratio days' sales in inventory is measured as:
A. inventory turnover plus 365 days.
B. inventory times 365 days.
C. inventory plus cost of goods sold, divided by 365 days.
D. 365 days divided by the inventory.
E. 365 days divided by the inventory turnover. - CORRECT ANSWERS-E
The receivables turnover ratio is measured as:
A. sales plus accounts receivable.
B. sales divided by accounts receivable.
C. sales minus accounts receivable, divided by sales.
D. accounts receivable times sales.
E. accounts receivable divided by sales. - CORRECT ANSWERS-B
The total asset turnover ratio measures the amount of:
A. total assets needed for every $1 of sales.
B. sales generated by every $1 in total assets.
C. fixed assets required for every $1 of sales.
D. net income generated by every $1 in total assets.
E. net income than can be generated by every $1 of fixed assets. - CORRECT
ANSWERS-B
Ratios that measure how efficiently a firm's management uses its assets and equity to
generate bottom line net income are known as _______ ratios.
A. asset management
B. long-term solvency
C. short-term solvency
D. profitability
E. market value - CORRECT ANSWERS-D
The financial ratio measured as net income divided by sales is known as the firm's:
A. profit margin.
B. return on assets.
C. return on equity.
D. asset turnover.
,E. earnings before interest and taxes. - CORRECT ANSWERS-A
The measure of net income returned from every dollar invested in total assets is the:
A. profit margin.
B. return on assets.
C. return on equity.
D. asset turnover.
E. earnings before interest and taxes. - CORRECT ANSWERS-B
The financial ratio that measures the accounting profit per dollar of book equity is
referred to as the:
A. profit margin.
B. price-earnings ratio.
C. return on equity.
D. equity turnover.
E. market profit-to-book ratio. - CORRECT ANSWERS-C
The amount that investors are willing to pay for each dollar of annual earnings is
reflected in the:
A. return on assets.
B. return on equity.
C. debt-equity ratio.
D. price-earnings ratio.
E. DuPont identity. - CORRECT ANSWERS-D
The market-to-book ratio is measured as the:
A. market price per share divided by the par value per share.
B. net income per share divided by the market price per share.
C. market price per share divided by the net income per share.
D. market price per share divided by the dividends per share.
E. market value per share divided by the book value per share. - CORRECT
ANSWERS-E
The external funds needed (EFN) equation projects the addition to retained earnings as:
A. PM × Δ Sales.
B. PM ×Δ Sales× (1 - d).
C. PM × Projected sales × (1 - d).
D. Projected sales × (1 - d).
E. PM ×Projected sales. - CORRECT ANSWERS-C
Which one of the following statements is correct concerning ratio analysis?
, A. A single ratio is often computed differently by different individuals.
B. Ratios do not address the problem of size differences among firms.
C. Only a very limited number of ratios can be used for analytical purposes.
D. Each ratio has a specific formula that is used consistently by all analysts.
E. Ratios cannot be used for comparison purposes over periods of time. - CORRECT
ANSWERS-A
Which one of the following is a liquidity ratio?
A. quick ratio
B. cash coverage ratio
C. total debt ratio
D. EV multiple
E. times interest earned ratio - CORRECT ANSWERS-A
An increase in which one of the following accounts increases a firm's current ratio
without affecting its quick ratio?
A. accounts payable
B. cash
C. inventory
D. accounts receivable
E. fixed assets - CORRECT ANSWERS-C
A supplier, who requires payment within ten days, should be most concerned with which
one of the following ratios when granting credit?
A. current
B. cash
C. debt-equity
D. quick
E. total debt - CORRECT ANSWERS-B
A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:
A. $1 in total equity.
B. $.53 in total assets.
C. $1 in current assets.
D. $.53 in total equity.
E. $1 in fixed assets. - CORRECT ANSWERS-D
The long-term debt ratio is probably of most interest to a firm's:
A. credit customers.
B. employees.
