Dr. Xavier Garza Gómez
University of Houston-Victoria
FIN 6352 Financial Management
Review Quiz for Chapter 4 – Analysis of Financial Statements
Although a full liquidity analysis requires the use of a cash budget, the current and quick
ratios provide fast and easy-to-use measures of a firm's liquidity position.
High current and quick ratios always indicate that a firm is managing its liquidity position
The inventory turnover ratio and days sales outstanding (DSO) are two ratios that are used
to assess how effectively a firm is managing its assets.
Companies HD and LD have the same sales, tax rate, interest rate on their debt, total as-
sets, and basic earning power.
Both companies have positive net incomes.
has a higher debt ratio and, therefore, a higher interest expense.
Which of the following
statements is CORRECT?
Company HD pays less in taxes.
Company HD has a lower equity multiplier.
Company HD has a higher ROA.
Company HD has a higher times interest earned (TIE) ratio.
Company HD has more net income.
Which of the following statements is CORRECT?
If a firm has the highest price/earnings ratio of any firm in its industry, then, other things
held constant, this suggests that the board of directors should fire the president.