Quiz Chapter 4 Answer Key

Quiz Chapter 4 Answer Key - CHAPTER 4 ANALYSIS OF FINANCIAL...

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Current ratio Answer: a EASY 1 . Considered alone, which of the following would increase a company’s current ratio? a. An increase in accounts receivable. b. An increase in accounts payable. c. An increase in net fixed assets. d. An increase in notes payable. Miscellaneous ratios Answer: d EASY 2 . A firm’s new president wants to strengthen the company’s financial position. Which of the following actions would make it financially stronger ? a. Increase accounts payable while holding sales constant. b. Increase accounts receivable while holding sales constant. c. Increase inventories while holding sales constant. d. Increase EBIT while holding sales constant. Accounts receivable Answer: b EASY 3 . Which of the following statements is CORRECT? a. If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its days’ sales outstanding (DSO) will increase. b. If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its days’ sales outstanding will decline. c. A reduction in accounts receivable would have no effect on the current ratio, but it would lead to an increase in the quick ratio. d. If a securities analyst saw that a firm’s days’ sales outstanding was increasing and was higher than the industry average and was trending still higher, this would be interpreted as a sign of strength. Du Pont analysis
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Quiz Chapter 4 Answer Key - CHAPTER 4 ANALYSIS OF FINANCIAL...

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