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BUS 325 Princ of Finance > Chapter 4 > Flashcards

Chapter 4 Flashcards

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1
Q

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.

A
  1. stockholders
  2. bondholders
  3. managers
  4. benchmarking
  5. accuracy
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2
Q

List 4 out of the 5 constituents (groups of interested persons) who benefit from the result of financial ratio analysis.

A
  1. Investors (stockholders)
  2. Bondholders
  3. Management
  4. Regulators
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3
Q

Times Interest Earned

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

D) Profitability

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4
Q

Inventory turnover

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

B) Asset management

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5
Q

Price/Earnings Ratio

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

E) Market Valuation

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6
Q

Operating Margin

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

D) Profitability

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7
Q

Quick Ratio

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

A) Liquidity

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8
Q

Profit Margin

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

D) Profitability

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9
Q

Return on Common Equity

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

D) Profitability

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10
Q

Days Sales Outstanding

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

B) Asset management

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11
Q

Return on total Assets

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

D) Profitability

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12
Q

Total Debt to Total Capital

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

C) Debt management

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13
Q

Fixed Asset Turnover

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

B) Asset management

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14
Q

Basic Earnings Power

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

D) Profitability

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15
Q

Total Asset Turnover

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

B) Asset management

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16
Q

Market Book Ratio

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

E) Market Valuation

17
Q

Current Ratio

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

A) Liquidity

18
Q

Inventory Turnover

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

B) Asset management

19
Q

Return on Invested Capital

A) Liquidity
B) Asset management
C) Debt management 
D) Profitability 
E) Market Valuation
A

D) Profitability

20
Q

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.

A
  1. trend
  2. industry averages
  3. benchmarking
  4. consistency
21
Q

(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
A

E) Quick Ratio

22
Q

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
A

L) Return on Common Equity

23
Q

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
A

C) Price/Earnings Ratio

24
Q

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
A

J) Profit Margin

25
Q

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
A

M) Days Sales Outstanding

26
Q

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

A) Times Interest Earned

27
Q

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
A

B) Fixed Asset Turnover

28
Q

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
A

N) Return on Total Assets

29
Q

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
A

O) Total Debt to Total Capital

30
Q

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
A

D) Operating Margin

31
Q

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
A

I) Current Ratio

32
Q

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
A

G) Total Assets Turnover

33
Q

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
A

P) Return on Invested Capital

34
Q

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
A

K) Inventory Turnover

35
Q

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
A

F) Basic Earnings Power

36
Q

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
A

H) Market/Book Ratio

BUS 325 Princ of Finance (4 decks)

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