Chapter 4 Flashcards
There are several constituents or interested parties in the results of financial ratio analysis. First, ____1____ are primarily interested in assessing whether their stock investment in a firm will provide adequate
returns. ____2____ are interested in whether or not the firm will be able to make interest and principal payments on time. ____3____ are interested
in every aspect of a firm, and will use the financial ratios as input into their ____4____ procedures. Regulators are primarily interested in the ____5____ of reported financial information.
- stockholders
- bondholders
- managers
- benchmarking
- accuracy
List 4 out of the 5 constituents (groups of interested persons) who benefit from the result of financial ratio analysis.
- Investors (stockholders)
- Bondholders
- Management
- Regulators
Times Interest Earned
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
D) Profitability
Inventory turnover
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
B) Asset management
Price/Earnings Ratio
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
E) Market Valuation
Operating Margin
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
D) Profitability
Quick Ratio
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
A) Liquidity
Profit Margin
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
D) Profitability
Return on Common Equity
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
D) Profitability
Days Sales Outstanding
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
B) Asset management
Return on total Assets
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
D) Profitability
Total Debt to Total Capital
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
C) Debt management
Fixed Asset Turnover
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
B) Asset management
Basic Earnings Power
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
D) Profitability
Total Asset Turnover
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
B) Asset management
Market Book Ratio
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
E) Market Valuation
Current Ratio
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
A) Liquidity
Inventory Turnover
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
B) Asset management
Return on Invested Capital
A) Liquidity B) Asset management C) Debt management D) Profitability E) Market Valuation
D) Profitability
When analyzing financial ratios, it’s important to understand the ____1____ for each ratio – how that ratio has shown either improvement or decline over time. Also important are ____2____ - how do we compare with our competition? If we compare poorly, management may begin a program of ____3____ in order to systematically study why the firm’s ratios don’t compare favorably, and to make appropriate improvements in operations. One last thing is to be sure to apply ____4____ in calculating and analyzing financial ratios.
- trend
- industry averages
- benchmarking
- consistency
(CA-inventory) / CL
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
E) Quick Ratio
NI / Equity
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
L) Return on Common Equity
Mkt Price of Stock / NI (per share)
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
C) Price/Earnings Ratio
NI / Sales
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
J) Profit Margin
AR / Avg Daily Sales
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
M) Days Sales Outstanding
EBIT / Interest Expense
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
A) Times Interest Earned
S / FA
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
B) Fixed Asset Turnover
NI / Total Assets
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
N) Return on Total Assets
Debt / Debt + Equity
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
O) Total Debt to Total Capital
EBIT / Sales
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
D) Operating Margin
CA / CL
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
I) Current Ratio
S / Total Assets
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
G) Total Assets Turnover
EBIT(1-t) / Debt + Equity
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
P) Return on Invested Capital
S / Inventory
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
K) Inventory Turnover
EBIT / Total Assets
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
F) Basic Earnings Power
Mkt Price of Stock / Book Value (per share)
A) Times Interest Earned B) Fixed Asset Turnover C) Price/Earnings Ratio D) Operating Margin E) Quick Ratio F) Basic Earnings Power G) Total Assets Turnover H) Market/Book Ratio I) Current Ratio J) Profit Margin K) Inventory Turnover L) Return on Common Equity M) Days Sales Outstanding N) Return on Total Assets O) Total Debt to Total Capital P) Return on Invested Capital
H) Market/Book Ratio