Question 1

problem with ratio analysis is that relationships can be manipulated.For example, we know that if our current ratio is less than 1.0, then using some of our cash to pay off some of our current liabilities would cause the current ratio to increase and thus make the firm look stronger.

Accepted Answer

A) True 
 B)False

Question 2

Companies HD and LD have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on their debt.However, company HD has a higher debt ratio.Which of the following statements is CORRECT?

Accepted Answer

A)  Given this information, LD must have the higher ROE.
B)  Company LD has a higher basic earning power ratio (BEP) .
C)  Company HD has a higher basic earning power ratio (BEP) .
D)  If the interest rate the companies pay on their debt is more than their basic earning power (BEP) , then Company HD will have the higher ROE.
E)  If the interest rate the companies pay on their debt is less than their basic earning power (BEP) , then Company HD will have the higher ROE.F) A) and B)
G) None of the above

Question 3

Which of the following would, generally, indicate an improvement in a company's financial position, holding other things constant?

Accepted Answer

A)  The TIE declines.
B)  The DSO increases.
C)  The EBITDA coverage ratio increases.
D)  The current and quick ratios both decline.
E)  The total assets turnover decreases.F) A) and E)
G) B) and C)

Question 4

Corp.and LD Corp.have identical assets, sales, interest rates paid on their debt, tax rates, and EBIT.However, HD uses more debt than LD.Which of the following statements is CORRECT?

Accepted Answer

A)  Without more information, we cannot tell if HD or LD would have a higher or lower net income.
B)  HD would have the lower equity multiplier for use in the Du Pont equation.
C)  HD would have to pay more in income taxes.
D)  HD would have the lower net income as shown on the income statement.
E)  HD would have the higher net income as shown on the income statement.F) A) and E)
G) A) and D)

Exam 3: Financial Analysis

problem with ratio analysis is that relationships can be manipulated.For example, we know that if our current ratio is less than 1.0, then using some of our cash to pay off some of our current liabilities would cause the current ratio to increase and thus make the firm look stronger.

Correct Answer
verified

Which of the following would, generally, indicate an improvement in a company's financial position, holding other things constant?

Correct Answer
verified

Corp.and LD Corp.have identical assets, sales, interest rates paid on their debt, tax rates, and EBIT.However, HD uses more debt than LD.Which of the following statements is CORRECT?

Correct Answer
verified

Companies HD and LD have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on their debt.However, company HD has a higher debt ratio.Which of the following statements is CORRECT?

Correct Answer
verified

Exam 3: Financial Analysis

problem with ratio analysis is that relationships can be manipulated.For example, we know that if our current ratio is less than 1.0, then using some of our cash to pay off some of our current liabilities would cause the current ratio to increase and thus make the firm look stronger.

Correct AnswerverifiedShow Answer

Which of the following would, generally, indicate an improvement in a company's financial position, holding other things constant?

Correct AnswerverifiedShow Answer

Corp.and LD Corp.have identical assets, sales, interest rates paid on their debt, tax rates, and EBIT.However, HD uses more debt than LD.Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Companies HD and LD have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on their debt.However, company HD has a higher debt ratio.Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified