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Unformatted text preview: ch3 Student: _______________________________________________________________________________________ Multiple Choice Questions 1. One key reason a long-term financial plan is developed is because: A. the plan determines your financial policy. B. the plan determines your investment policy. C. there are direct connections between achievable corporate growth and the financial policy. D. there is unlimited growth possible in a well-developed financial plan. E. None of the above. 2. Projected future financial statements are called: A. plug statements. B. pro forma statements. C. reconciled statements. D. aggregated statements. E. none of the above. 3. The percentage of sales method: A. requires that all accounts grow at the same rate. B. separates accounts that vary with sales and those that do not vary with sales. C. allows the analyst to calculate how much financing the firm will need to support the predicted sales level. D. Both A and B. E. Both B and C. 4. A _____ standardizes items on the income statement and balance sheet as a percentage of total sales and total assets, respectively. A. tax reconciliation statement B. statement of standardization C. statement of cash flows D. common-base year statement E. common-size statement 5. Relationships determined from a firm's financial information and used for comparison purposes are known as: A. financial ratios. B. comparison statements. C. dimensional analysis. D. scenario analysis. E. solvency analysis. 6. Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as _____ ratios. A. asset management B. long-term solvency C. short-term solvency D. profitability E. market value 7. The current ratio is measured as: A. current assets minus current liabilities. B. current assets divided by current liabilities. C. current liabilities minus inventory, divided by current assets. D. cash on hand divided by current liabilities. E. current liabilities divided by current assets. 8. The quick ratio is measured as: A. current assets divided by current liabilities. B. cash on hand plus current liabilities, divided by current assets. C. current liabilities divided by current assets, plus inventory. D. current assets minus inventory, divided by current liabilities. E. current assets minus inventory minus current liabilities. 9. The cash ratio is measured as: A. current assets divided by current liabilities. B. current assets minus cash on hand, divided by current liabilities. C. current liabilities plus current assets, divided by cash on hand. D. cash on hand plus inventory, divided by current liabilities. E. cash on hand divided by current liabilities. 10. Ratios that measure a firm's financial leverage are known as _____ ratios....
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- Spring '11