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






2. Norman Bates Corporation has total assets of $500000. Its equity is $200000. What is the company's debt to total asset ratio?






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






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






5. Why would an analyst use the Modified Du Pont system to calculate ROE when ROE may be calculated more simply? Explain.

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6. What do asset activity ratios measure?






7. What are ratios used to compare?

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






9. What is meant by the leverage effect?






10. What are debt ratios?

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11. How do you calculate total asset turnover? (This is an Asset Activity Ratio)






12. How do you calculate net profit margin? (This is a Profitability Ratio)






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






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

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15. How do you calculate M/B (market to book ratio)? (This is a Market Value Ratio)






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

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

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






19. What is market value added (MVA)?






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






21. What do liquidity ratios measure?






22. Explain trend analysis.

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






24. What is a mixed ratio?






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






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






27. How do you calculate the debt to total assets? (This is a Debt Ratio)






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






29. One way to judge whether a firm's ratio is too high or too low is to compare it to the ratios of other firms in the industry. This is sometimes called ____________.






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






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






32. Umbrella Corporation has total assets of $5 million and an asset turnover ratio of 4. If net income is $2 million - What is the value of the net profit margin?






33. How do you calculate return on assets? (This is a Profitability Ratio)






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






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






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






37. How do you calculate EVA?

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






39. What do market value ratios measure?

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






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






42. _________ (Cross-Sectional analysis) judges whether a firm's ratio is too high or too low in comparison with other firms in the industry.






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






44. What is a financial ratio?






45. 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?






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






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






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






49. 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.






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