Ch3&4PossibleTestQuestions

Ch3&4PossibleTestQuestions - Lab 4: Questions from...

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Lab 4: Questions from Chapters 3 and 4 1. ________ indicate the firm’s capacity to meet its debt obligations, both short term and long term. a. Liquidity ratios b. Asset management ratios c. Debt management ratios d. Profitability ratios 2. The fixed asset turnover ratio is influenced by: a. the age of the assets employed b. the depreciation method used by the firm c. the firm’s choice of a production technology d. all of the above 3. The ratio group most likely to be used to indicate a firm’s ability to meet short-term financial obligations would be: a. liquidity ratios b. financial leverage ratios c. activity ratios d. profitability ratios 4. Which of the following ratios would probably not be used to assess the profitability of a firm? a. Return on stockholders’ equity b. Return on total assets c. Times interest earned d. A and c only 5. Under the DuPont system, the return on assets is equal to: a. the product of the gross profit margin and inventory turnover b. the sum of the debt-equity ratio and the return on sales c. the product of the return on sales and total asset turnover d. the product of the return on sales, total asset turnover, and equity multiplier e. none of the above 6. Which of the following is not affected by a change in interest expense? a. Gross margin b. EBIT c. ROE d. A and b e. All of the above 7. Find the debt ratio of a firm with total liabilities equal to $800,000 and net worth equal to $2,400,000. a. .33 b. .50 c. .75 d. .25 e. .67 1
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8. Williamson Trucking has current sales of $10,000 and a cost of goods sold of $4,300. Williamson has projected sales to increase 50% and expects the new cost ratio to decrease by 2% due to increased efficiency. Assuming that Williamson wants to maintain an inventory turnover of 5.0, calculate their projected level of inventory. (round to the nearest $)
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This note was uploaded on 11/08/2010 for the course AGEC 424 taught by Professor Staff during the Spring '08 term at Purdue University-West Lafayette.

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Ch3&4PossibleTestQuestions - Lab 4: Questions from...

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