A. Which of the following financial ratios are market-based ratios?

1. Debt-to-equity
2. Price-to-earnings
3. Return on investment
4. Gross profit margin

B. The appropriate standard for comparison of financial ratios probably should be the

1. best firm in the industry
2. worst firm in the industry
3. industry average
4. better performing firms in the industry

C. ________ indicate the ability of the firm to meet its short-term financial obligations

1. Activity ratios
2. Liquidity ratios
3. Leverage ratios
4. Profitability ratios

D. The primary weakness of the current ratio is

1. it is difficult to calculate
2. it includes some items, such as inventory, that may not be readily liquid
3. it requires many years of past data
4. it includes many non-current items in its calculation

E. The quick ratio is the same as current ratio except it does not consider

1. cash
2. accounts receivable
3. prepaid items
4. inventories

F. ________ indicate the firm's capacity to meet its debt obligations, both short-term and long-term.

1. Liquidity ratios
2. Activity ratios
3. Financial leverage ratios
4. Profitability ratios

G. The fixed asset turnover ratio is influenced by

1. the age of the assets employed
2. the depreciation method used by the firm
3. the firm's choice of a production technology
4. all of the above

H. The greater the amount of financial leverage used by a firm, the greater its ___________, all other things being equal.

1. profitability
2. risk
3. liquidity
4. size

 

I. The best accounting-based measure of a firm's profitability is

1. gross profit margin
2. net profit margin
3. return on fixed assets
4. return on total assets

J. Financial ratio analysis is most often performed as a

1. comparative analysis
2. trend analysis
3. point in time analysis
4. comparative analysis and a trend analysis