1.An analyst computes the following ratios for Iridescent Carpeting Inc. and compares the results to the industry averages: Financial Ratio | Iridescent Carpeting | Industry Average | Current Ratio | 2.3x | 1.8x | Net Profit Margin | 22% | 24% | Return on Equity | 17% | 20% | Total Debt / Total Capital | 35% | 56% | Times Interest Earned | 4.7x | 4.1x |
Based on the above data, which of the following can the analyst conclude? A) Iridescent Carpeting has better short-term liquidity than its competitors. B) Iridescent Carpeting has stronger profitability than its competitors. C) Iridescent Carpeting has more financial risk than its competitors. D) Iridescent Carpeting is most likely a younger company than its competitors.
2.In a recent staff meeting, David Hurley, stated that analysts should understand that financial ratios mean little by themselves. He advised his colleagues to evaluate financial ratios carefully. During the discussion he made the following statements:
Statement 1: A company can be compared with others in its industry by relating its financial ratios to industry norms. However, care must be taken because many ratios are industry-specific, but not all ratios are important to all industries. Statement 2: Comparing a company to the overall economy is useless because overall business conditions are constantly changing. Specifically, it is not the case that financial ratios tend to improve when the economy is strong and weaken during recessionary times. Are statements 1 and 2 as made by Hurley regarding financial ratio analysis correct?
A) Incorrect Correct B) Incorrect Incorrect C) Correct Incorrect D) Correct Correct
3.Which of the following is least likely an indicator of a firm’s liquidity?
A) Cash as a percentage of sales. B) Amount of credit sales. C) Inventory turnover. D) Quick ratio.
4.A firm has average days of receivables outstanding of 22 compared to an industry average of 29 days. An analyst would most likely conclude that the firm:
A) has better credit controls than its peer companies. B) makes less credit sales than the average firm in its industry. C) has a lower cash conversion cycle than its peer companies. D) may have credit policies that are too strict.
5.Alton Industries will have better liquidity than its peer group of companies if its:
A) quick ratio is lower. B) average trade payables are lower. C) ROA is higher. D) receivables turnover is higher.
6.Which of the following is NOT a limitation to financial ratio analysis?
A) Differences in international accounting practices. B) The use of alternative accounting methods. C) A firm that operates in only one industry. D) The need to use judgment. | 
发表于 2008-4-9 09:58
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