Question

True/False (True=A, False-B) 1. Market value ratios provide management with an indication of how investors view the firm's past performance and especially its future prospects. T 2. An odd lot is defined as purchase or sale of less than 100 shares of a stock. 3. A bid is an asking (selling) price of a specialist or a market maker. 4. A Mutual Fund is an example of a buy side firm. 5. Commercial banks are depository institutions. 6. Financial institutions are more diversified today than they were in the past, when federal laws kept investment banks, commercial banks, insurance companies, and similar organizations quite separate. Today the larger financial services corporations offer a variety of services, ranging from checking accounts, to insurance, to underwriting securities, to stock brokerage 7. Inventory turnover is a liquidity ratio. 8. An increase in account receivables will increase a company's current ratio. 9. A high current ratio always means that a company is efficiently utilizing its current assets.

Answer 1

1) True, market value ratios are indicate investor's view on company's past and future prospects, since these ratios are determined and affected by market directly.

2) True, The purchase or sale of securities in quantities of fewer than the standard trading lot -- 100 shares of stock or $1,000 worth of bonds -- is considered an odd lot.

3) False, A bid is a buying price of a specialist or market maker. A market maker puts in a bid when he wants to buy an asset.

4) True, Buy-side is a term used in investment firms to refer to that concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, hedge funds, and pension funds are the most common types of buy side entities.

5) True, Commercial banks are for-profit companies and are the largest type of depository institutions. These banks offer a range of services to consumers and businesses such as checking accounts, consumer and commercial loans, credit cards, and investment products.

6) True, Financial intermediaries have evolved with changes in regulations and customer needs

7) True, Inventory turnover is a liquidity ratio

8) True, Account Receivables = (Inventory + Accounts Receivables + Cash and cash equivalents) / (Accruals + Accounts payables + Notes Payables)

According to the formula, increasing accounts receivables increases current ratio.

9) False,  if a company has a very high current ratio compared to their peer group, it indicates that management may not be using their assets efficiently.