PTD4 Flashcards
North Bank is analyzing Belle Corp.'s financial statements for a possible extension of credit. Belle's quick ratio is significantly better than the industry average. Which one of the following factors should North consider as a possible limitation of using this ratio when evaluating Belle's creditworthiness? Accounts Receivable Marketable Securities Inventories Yes Yes Yes Yes Yes No Yes No Yes Yes No No This An
YES YES NO
The quick ratio (also called the acid-test ratio) measures the relationship between current assets that are cash or can be converted to cash quickly and the total of current liabilities.
Current assets that can be converted to cash quickly include (in addition to cash) accounts receivable and marketable securities (expected to be sold in the near term). Inventories are not included in the quick ratio because, normally, they cannot be converted to cash quickly.
By excluding inventories (and other current assets that cannot be converted to cash quickly, e.g., prepaid assets), the measure of assets available to pay current liabilities in the quick ratio is more conservative than the measure of assets used in the working capital (or current) ratio; thus, the quick ratio is also called the acid-test ratio.
The benefits of debt financing over equity financing are likely to be highest in which of the following situations?
High marginal tax rates and few noninterest tax benefits.
Low marginal tax rates and few noninterest tax benefits.
High marginal tax rates and many noninterest tax benefits.
Low marginal tax rates and many noninterest tax benefits
High marginal tax rates and few noninterest tax benefits.
This answer is correct because when the marginal tax rate is high and the company has few noninterest tax benefits, the deduction for interest on debt is maximized.
Which of the following is least likely to be a source of big data? Wearables A thermostat A single-page pdf document A cow
Correct! A single-page pdf document, by itself, is hardly a likely or viable source of big data.
Bloomsdale wants to determine if the company from whom she buys seafood is buying only sustainable seafood. Bloomsdale may be able to use \_\_\_\_\_\_\_\_\_\_\_\_ to find this information. Bitcoin Multifactor identification Blockchain OLTP
Correct! A transaction record that is stored in blockchain can be designed to contain this information.
XBRL is a \_\_\_\_\_\_\_\_\_\_\_\_ that is derived from \_\_\_\_\_\_\_\_. Financial tagging language; XML Protocol; STMP Company; a stock offering Financial tagging language; STMP
Financial tagging language; XML
Correct! XBRL (i.e., eXtensible business reporting language) is for tagging financial information. It is derived from XML (i.e., eXtensible markup language).
n organization launches a new product and finds the product is performing better than expected and that the volatility of sales is less than expected. Which of the following is the organization most likely to do?
Review its internal control procedures.
Investigate new technologies to improve product performance.
Revise its tolerance and decrease its risk appetite
Review its ERM practices.
Review its ERM practices.
This Answer is Correct
Correct! The organization should review its ERM practices to better understand why it misestimated the risks related to the new product.
Which of the following phrases defines the internal rate of return on a project?
The number of years it takes to recover the investment.
The discount rate at which the net present value of the project equals zero.
The discount rate at which the net present value of the project equals one.
The weighted-average cost of capital used to finance the project.
The discount rate at which the net present value of the project equals zero.
The internal rate of return on a project is defined as the discount rate at which the net present value of the project equals zero. Specifically, the internal rate of return assesses a project by determining the discount rate that equates the present value of the project’s future cash inflows with the present value of the project’s future cash outflows.
Which of the following is not true?
Intranets are implemented using Internet protocols.
Training time for intranet-based applications is usually lower than training for similar programs using a traditional LAN interface.
Intranets are generally available to the public.
Intranets are often used to connect geographically separate LANs within a company.
Intranets are generally available to the public.
Intranets usually require a username and password in order to access the system.
Which of the following ratios would be used to evaluate a company’s profitability? Current ratio. Inventory turnover ratio. Debt to total assets ratio. Gross margin ratio.
Gross margin ratio.
This Answer is Correct
This answer is correct. The gross margin ratio is equal to gross profit divided by sales. It is a measure of profitability.
