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Multiple choice questions

Try the multiple choice questions below to test your knowledge of Chapter 6. Once you have completed the test, click on 'Submit Answers for Grading' to get your results.

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This activity contains 21 questions.

Question 1.
Determine a firm's total asset turnover (TAT) if its net profit margin is 5 percent, assets are $8 million, and ROI is 8 percent.


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Question 2.
Felton Farm Supplies, Inc., has an 8 percent return on total assets of $300,000 and a net profit margin of 5 percent. What are its sales?


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Question 3.
Which of the following would not improve the current ratio?


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Question 4.
The gross profit margin is unchanged, but the net profit margin declined over the same period. This could have happened if __________.


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Question 5.
A company can improve (lower) its debt-to-total asset ratio by doing which of the following?


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Question 6.
Which of the following statements (in general) is correct?


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Question 7.
Sales for 1991 (base year) were $800,000 and the year-end total asset turnover ratio was 1.6. With which of the following statements would you agree?


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Question 8.
Krisle and Kringle's debt-to-total assets ratio is.4. What is its debt-to-equity ratio?


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Question 9.
Which of the following statements is the least likely to be correct?


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Question 10.
Which of the following statements is most accurate?


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Question 11.
The authors place financial ratios into __________.


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Question 12.
Benchmarking can be applied to ratio analysis. How is this different from comparing a firm's ratios to industry averages over time?


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Question 13.
Which of the following statements is most correct regarding the current ratio for a firm that uses industry averages and a peer benchmark as their comparison?


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Question 14.
The DuPont Approach breaks down the earning power on shareholders' book value (ROE) as follows: ROE = __________.


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Question 15.
In conducting a common-size analysis every balance sheet item is divided by __________ and every income statement is divided by __________.


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Question 16.
In conducting an index analysis every balance sheet item is divided by __________ and every income statement is divided by __________.


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Question 17.
Which group of ratios measure a firm's ability to meet short-term obligations?


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Question 18.
Which group of ratios relate the financial charges of a firm to its ability to service them?


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Question 19.
Which group of ratios measure how effectively the firm is using its assets?


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Question 20.
Which group of ratios relate profits to sales and investment?


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Question 21.
Which group of ratios shows the extent to which the firm is financed with debt?


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