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Topic 3 Review

Quiz by Jane Nelms

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22 questions
Show answers
  • Q1
    Why should businesses and investors determine a company's working capital?
    To anticipate financial difficulties
    To determine the company's profitability
    To obtain needed credit
    To recognize market opportunities
    30s
  • Q2
    A business uses inventory turnover rates to determine if monthly inventory is too large or too small. What is the turnover rate if the average merchandise inventory is $55,000 and the cost of goods sold is $374,000?
    8.60%
    1.50%
    4.20%
    6.80%
    30s
  • Q3
    Since Penelope is having difficulty paying the bills for her start-up business, she wants to calculate her current ratio. Which information will she need to do this successfully?
    Total assets and total liabilities
    Current assets and current liabilities
    Total accounts receivable and total cash
    Current inventory and current expenses payable
    30s
  • Q4
    According to a company’s most recent income statement, its sales last quarter totaled $489,300, and its cost of goods sold was $241,000. What was the company’s gross profit margin for the quarter?
    25%
    10%
    51%
    24%
    30s
  • Q5
    What is the process of reducing the value of a business's assets over a period of time?
    Depreciation
    Adjustment
    Consolidation
    Reconciliation
    30s
  • Q6
    The PEG ratio is unique because it incorporates price, earnings, and
    growth of price-earnings.
    gross profit.
    growth of EPS.
    growth of sales.
    30s
  • Q7
    Why do financial advisers conduct a fundamental analysis of a business before recommending it as an investment to clients?
    To determine intrinsic value
    To negotiate a fair price
    To calculate a commission rate
    To prepare a written report
    30s
  • Q8
    When you study a company's business model, product mix, competition, and brand, you are studying
    industry characteristics.
    objective characteristics.
    qualitative measures.
    quantitative measures.
    30s
  • Q9
    Sammy received one share of stock in Nike, Inc. as a gift. He wondered how much of the company's profit went to his single share, so he divided net income by the number of outstanding shares of common stock. This common ratio is called
    earnings per share.
    gross profit margin.
    return on equity.
    price-earnings.
    30s
  • Q10
    The benefit of fundamental analysis is that
    it helps an investor track daily price fluctuations.
    an investor need not look closely at the company itself.
    after choosing a stock, an investor needs to do only periodic reviews.
    an investor can make better short-term buy and sell decisions.
    30s
  • Q11
    Which of the following probably is the most important piece of information that a cash flow statement provides\:
    Taxes due for the year
    Cost of maintenance
    Amount of money expected
    Statistics from industry
    30s
  • Q12
    According to a company's most recent statement of cash flows, its cash flow from operations for the most recent year was $1,375,400. The net cash used by investing was an outlay of $690,000. The net cash spent on financing was $140,300. What was the company's free cash flow?
    $686,400
    $549,700
    $545,100
    $830,300
    30s
  • Q13
    Return on equity (ROE) measures management's ability to make a profit
    from the money generated by sales.
    by becoming more efficient in operations.
    from the money that shareholders have invested.
    by becoming shareholders of smaller firms.
    30s
  • Q14
    Ratios are calculated by
    multiplying or dividing, depending on the ratio.
    dividing one number by another.
    adding and subtracting.
    multiplying one number by another.
    30s
  • Q15
    A class of financial ratios that measures the ability of a company to turn assets into cash and to pay its bills is called
    profitability
    asset management ratios.
    liquidity ratios.
    debt ratios.
    30s

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