Question

Question 2

To measure how long it takes customers to pay their balances we would look at the

Question 2 options:

a)            Inventory turnover ratio

b)            Current ratio

c)            Average collection period

d)            Receivables turnover

Question 3

A company with a decreasing interest expense would see what change to its times interest earned?

Question 3 options:

a)            An increase

b)            A decrease

c)            No change

d)            Cannot be determined

Question 4

As we look at how a company’s ratios have changed over time we need to consider all of these except:

Question 4 options:

a)            The company’s industry

b)            The direction the values have moved

c)            The impact of inflation

d)            None of the above

Question 6

Asset utilization ratios include all but which of the following?

Question 6 options:

a)            Receivable turnover

b)            Inventory turnover

c)            Average collection period

d)            Return on assets

Question 7

All else staying equal, what impact might we assume if a company’s debt to total assets increases?

Question 7 options:

a)            Times interest earned will increase

b)            Times interest earned will decrease

c)            Return on equity will decrease

d)            Profit margin will increase

Question 8

Higher inflation rates can show ‘false outcomes’ by

Question 8 options:

a)            Lowering sales

b)            Increasing sales

c)            Lowering profits

d)            None of the above

Question 9

If a company has a quick ratio very close to its current ratio what might we conclude about their inventory?

Question 9 options:

a)            Inventory makes up a large portion of their current assets

b)            Inventory makes up a small portion of their current assets

c)            Inventory makes up all the company’s current assets

d)            This does not give us information about inventory

Question 10

A company with an average collection period of 30 days in an industry where the average collection period is 28 days would be said to

Question 10 options:

a)            Outperform the industry

b)            Underperform the industry

c)            Have no meaningful difference

d)            None of the above

Question 12

What might we conclude about a company with a profit margin of 10%?

Question 12 options:

a)            It is preforming strongly

b)            It is earning a sufficient return on its sales

c)            It is outperforming its industry

d)            We are limited by not knowing the industry average

Question 15

If a company is becoming less liquid which ratio group would we expect to be impacted first?

Question 15 options:

a)            Profitability ratios

b)            Asset utilization ratios

c)            Liquidity ratios

d)            Debt utilization ratios

Answer 1

Q2. Option c Average Collection Period is correct
Q3,Option a Times Interest Earned will increase is correct
Q4.Option c The impact of inflation is correct.
Q6. Option d. Return of Assets is correct.
Q7. Option b Times Interest Earned will decrease
Q8. Option b Increasing Sales is correct
Q9. Option b Inventory makes a small portion of their current assets
Q10. Option b Under perform the industry
Q12. Option d We are limited by not knowing the industry average
Q15. Option c Liquidity ratios

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