Current Ratio. What effect would the following actions have on a firm's current ratio? Assume that net working capital is positive. a. Inventory is purchased. b. A supplier is paid. c. A short-term bank loan is repaid. d. A long-term debt is paid off early. e. A customer pays off a credit account. f. Inventory is sold at cost. g. Inventory is sold for a profit. LO 3.2

Current Ratio. What effect would the following actions have on a firm's current ratio? Assume that net working capital is positive. a. Inventory is purchased. b. A supplier is paid. c. A short-term bank loan is repaid. d. A long-term debt is paid off early. e. A customer pays off a credit account. f. Inventory is sold at cost. g. Inventory is sold for a profit. LO 3.2

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 41MCQ

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13. A short-term creditor would be interested in A. profitability ratio. B. efficiency ratio. C. liquidity ratio. D. leverage ratio. The quick ratio of a firm would be unaffected by which of the following? 14. A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue. C. Inventories are sold for cash D. Inventories are sold on a credit basis.
Which one of the following will decrease the net working capital of a firm? Assume the current ratio is greater than 1.0. A. selling inventory at cost B. collecting payment from a customer C. paying a payment on a long-term debt D. selling a fixed asset for book value E. paying a supplier for the purchase of an inventory item
Which one of the following is a measure of long term solvency? A. Price earning ratio B. Profit margin C. Cash coverage ratio D. Receivables turnover E. Quick ratio
A company’s ability to earn more on borrowed money than the associated interest cost so that net income increases is called: A. Interest B. A debenture C. Financial leverage D. Covenants
By modifying the break-even equation, a company is able to determine the sales required to earn a ________________ profit. a.banker's b.working capital c.target d. contribution
4. According to the basic DuPont equation, a firm's ROE is the product of what other two ratios? a. net profit margin and the equity multiplier b. ROA and the equity multiplier C. net profit margin and return on equity d. net profit margin and total asset turnover
If a firm decreases its operating costs, all else constant, then the: A. profit margin will decrease.B. return on assets will decrease.C. total asset turnover rate will increase.D. cash coverage ratio will decrease.E. price-earnings ratio will decrease Can you give me detailed explanation?
When we compute the EV/EBITDA multiple, i.e. the ratio of Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization, we estimate the enterprise value of a firm by adding the values of debt and equity and netting out cash. Could you provide a reason for netting out cash? O a. Cash can be used to pay down debt. O b. Cash is easy to value. O c. None of the given answers is correct. The income from cash is not part of EBITDA. Cash is liquid. O d. O e.
What do the liquldity ratlos tell you In the financlal analysis? 1 The capital structure of a company 2 The profitability of the company 3. The efficiency of inventory 4. The company's ability to pay off debt obligations 5. Ratios analysis
3 Assessing a firm's overall solvency is best accomplished by evaluating current ratio debt to assets ratio. price-earnings ratio return on assets. gross margin.
7. The internal rate of return (IRR) can best be described as: A. the discount rate at which a set of cash flows have a zero net present value B. the discount rate at which a set of cash flows have a positive net present value c. the rate which the business has to pay to raise finance for an investment the return required by the managers of the business D.
CAN SOMEONE HELP ME WITH 2 QUESTIONS? (Earnings before interest & taxes ∕ Net sales) A. Operating profit margin B. Net profit margin C. Operating return on assets D. Return on total assets E. Return on equity A market is liquid if A. trades are executed quickly. B. market prices don’t fluctuate sharply on successive trades C. both a) and b) are correct. D. if fees are low.