Chapter 19 Financial Statement Analysis Answer Key
Multiple Choice Questions
1.
A firm has a higher quick (or acid test) ratio than the industry average, which implies
2.
A firm has a lower quick (or acid test) ratio than the industry average, which implies
3.
An example of a liquidity ratio is
4.
__________ provides a snapshot of the financial condition of the firm at a particular time.
5.
__________ is a report of the cash flow generated by the firm’s operations, investments
and financial activities.
6.
A firm has a higher asset turnover ratio than the industry average, which implies
Topic: Financial Statement Analysis
7.
A firm has a lower asset turnover ratio than the industry average, which implies
8.
If you wish to compute economic earnings and are trying to decide how to account for
inventory,
9.
__________ is a summary of the profitability of the firm over a period of time such as a
year.
10.
Over a period of 30 years or so, in managing investment funds, Benjamin Graham used the
approach of investing in the stocks of companies where the stocks were trading at less
than their working capital value. The average return from using this strategy was
approximately
11.
A study by Speidell and Bavishi (1992) found that when accounting statements of foreign
firms were restated on a common accounting basis,
12.
If the interest rate on debt is higher than ROA, a firm will __________ by increasing the use
of debt in the capital structure.
13.
If the interest rate on debt is lower than ROA, then a firm will __________ by increasing the
use of debt in the capital structure.
14.
A firm has a market to book value ratio that is equivalent to the industry average and an
ROE that is less than the industry average, which implies
15.
In periods of inflation, accounting depreciation is __________ relative to replacement cost
and real economic income is________.
16.
If a firm has a positive tax rate, a positive ROA, and the interest rate on debt is the same
as ROA, then ROA will be
Topic: Financial Statement Analysis
17.
Topic: Financial Statement Analysis
A firm has a P/E ratio of 12 and a ROE of 13% and a market-to-book value of
18.
The financial statements of Black Barn Company are given below.
Refer to the financial statements of Black Barn Company. The firm’s current ratio for 2009
is
19.
The financial statements of Black Barn Company are given below.
Refer to the financial statements of Black Barn Company. The firm’s quick ratio for 2009
is
20.
The financial statements of Black Barn Company are given below.
Refer to the financial statements of Black Barn Company. The firm’s leverage ratio for
2009 is
21.
The financial statements of Black Barn Company are given below.
Refer to the financial statements of Black Barn Company. The firm’s times interest earned
ratio for 2009 is
22.
The financial statements of Black Barn Company are given below.
Refer to the financial statements of Black Barn Company. The firm’s average collection
period for 2009 is