A. Which of the following financial ratios are market-based ratios?
Debt-to-equity
Price-to-earnings
Return on investment
Gross profit margin
B. The appropriate standard for comparison of financial ratios probably should be the
best firm in the industry
worst firm in the industry
industry average
better performing firms in the industry
C. ________ indicate the ability of the firm to meet its short-term financial obligations
Activity ratios
Liquidity ratios
Leverage ratios
Profitability ratios
D. The primary weakness of the current ratio is
it is difficult to calculate
it includes some items, such as inventory, that may not be readily liquid
it requires many years of past data
it includes many non-current items in its calculation
E. The quick ratio is the same as current ratio except it does not consider
cash
accounts receivable
prepaid items
inventories
F. ________ indicate the firm's capacity to meet its debt obligations, both short-term and long-term.
Liquidity ratios
Activity ratios
Financial leverage ratios
Profitability ratios
G. The fixed asset turnover ratio is influenced by
the age of the assets employed
the depreciation method used by the firm
the firm's choice of a production technology
all of the above
H. The greater the amount of financial leverage used by a firm, the greater its ___________, all other things being equal.
profitability
risk
liquidity
size
I. The best accounting-based measure of a firm's profitability is
gross profit margin
net profit margin
return on fixed assets
return on total assets
J. Financial ratio analysis is most often performed as a
comparative analysis
trend analysis
point in time analysis
comparative analysis and a trend analysis