Test your basic knowledge |

Analysis Of Financial Statements

Subject : business-skills
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The difference between the firm's future earnings and liquidation value is the _____________________ of the firm.






2. Given $2 -044000 in total assets - $1 -351000 in total stockholders' equity - and debt-to-total-asset ratio of 33.90% - calculate the debt to equity ratio.






3. Why are M/B and MVA highly correlated?






4. If the net profit margin of Dobie's Dog Hotel is maintained at 20 percent and total asset turnover ratio is .25 - calculate return on assets.






5. Explain the difference between the current and the quick ratio.






6. What do asset activity ratios measure?






7. What do market value ratios measure?

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8. What are ratios used to compare?

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9. How do you calculate inventory turnover? (This is an Asset Activity Ratio)






10. What does economic value added (EVA) measure?

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11. How do you calculate operating profit margin? (This is a Profitability Ratio)






12. The ___________________________measures how efficiently a firm utilizes its assets.






13. The ____________________________measures how much profit out of each sales dollar is left after all expenses are subtracted.






14. How do you calculate times interest earned? (This is a Debt Ratio)






15. Why are trend analysis and industry comparison important to financial ratio analysis?

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16. What do liquidity ratios measure?






17. ________ uses computed ratio values for several time periods and compares them.






18. What is a mixed ratio?






19. How do you calculate return on equity? (This is a Profitability Ratio)






20. Boca Corporation has a return on assets ratio of 6 percent. If the debt to total assets ratio is .5 - What is the firm's return on equity?






21. What is meant by the leverage effect?






22. What is market value added (MVA)?






23. Why is the EVA an important new tool in financial analysis?






24. Given $20 million in total assets - $14 million in total stockholders' equity - and a debt to total asset ratio of 30 percent for Folson Corporation - what will be the debt to equity ratio?






25. The ___________________________is the market price per share of a company's common stock divided by the accounting book-value-per-share ratio.






26. What are debt ratios?

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27. Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain.






28. If total assets are $20 million - noncurrent assets are $2 million - inventory is $3 million - and sales are $5 million for Toronto Brewing Company - what is the inventory turnover ratio?






29. Explain how financial ratio analysis helps financial managers assess the health of a company.






30. The ___________________________tells us how efficiently the firm converts inventory to sales.






31. How do you calculate gross profit margin? (This is a Profitability Ratio)






32. Explain trend analysis.

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33. Jumbo Corp has a quick ratio value of 1.5. It has total current assets of $100000 and total current liabilities of $25000. If sales are $200000 - What is the value of the inventory turnover ratio?






34. How do you calculate the du pont system of ratio analysis?






35. Which ratios would a potential long-term bond investor be most interested in? Explain.

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36. How do you calculate the debt to equity? (This is a Debt Ratio)






37. The ____________________________measures the average return on the firm's capital contributions from its owners.






38. The ___________________________measures how many days - on average - the company's credit customers take to pay their accounts.






39. If one-half the current assets in ST-2 consist of inventory - What is the value of the quick ratio?






40. How do you calculate EVA?

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41. Malpaso Company has current assets of $50000. Total assets are $200000; and longterm liabilities and common stock collectively total $180000. What is the value of the current ratio?






42. How do you calculate the quick ratio? (This is a Liquidity Ratio)






43. The ___________________compares all the current assets of the firm to all the company's current liabilities.






44. Under what circumstances would market to book value ratios be misleading? Explain.






45. How do you calculate the current ratio? (This is a Liquidity Ratio)






46. What does the du pont system of ratio analysis examine?






47. The ___________________________is the percentage of debt relative to the amount of equity of the firm.






48. In the modified Du Pont equation - ROE is the product of net profit margin - total asset turnover - and the ________________________.






49. How do you calculate the modified du pont equation?






50. How do you calculate P/E? (This is a Market Value Ratio)