{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

HMWRK+2 - Q uestion 1 Which of the following would...

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Question 1 Which of the following would, generally, indicate an IMPROVEMENT in a company’s financial position, holding other things constant? a . The total assets turnover decreases. b . The current ratio declines. c. The quick ratio increases. d . The TIE declines. e.The DSO increases. Question 2 A firm wants to strengthen its financial position. Which of the following actions would INCREASE its current ratio? a . Use cash to repurchase some of the company’s own stock. b . Use cash to increase inventory holdings. c. Issue new stock, then use some of the proceeds to purchase additional inventory and hold the remainder as cash. d . Reduce the company’s days’ sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. e . Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year. Question 3
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable. This action had no effect on the company’s total assets or operating income. Which of the following effects would occur as a result of this action? a . The company’s current ratio increased. b . The company’s times interest earned ratio decreased. c. The company’s debt ratio increased. d . The company’s equity multiplier increased. e.The company’s basic earning power ratio increased. Question 4 Which of the following statements is CORRECT? a . There is no relationship between the days’ sales outstanding (DSO) and the average collection period (ACP). These ratios measure entirely different things. b . If a security analyst saw that a firm’s days’ sales outstanding (DSO) was higher than the industry average, and was increasing and trending still higher, this would be interpreted as a sign of strength. c. A high average DSO indicates that none of its customers are paying on time. In addition, it makes no sense to evaluate the firm's DSO with the firm's credit terms. d . If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its days’ sales outstanding will decline. e A reduction in accounts receivable would have no effect on the current ratio,
Image of page 2
. but it would lead to an increase in the quick ratio. Question 5 Which of the following statements is CORRECT? a . If two firms differ only in their use of debt—i.e., they have identical assets, sales, operating costs, interest rates on their debt, and tax rates—but one firm has a higher debt ratio, the firm that uses more debt will have a lower profit margin on sales and a lower return on assets. b . The debt ratio as it is generally calculated makes an adjustment for the use of assets leased under operating leases, so the debt ratios of firms that lease different percentages of their assets are still comparable.
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern