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Multiple Choice Quiz
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1
Of the following assets, which is generally the most liquid?
A)Plant and equipment
B)Inventory
C)Goodwill
D)Accounts receivable
2
Intangible fixed assets would include:
A)Building
B)Machinery
C)Trademarks
D)Equipment
3
Net working capital (NWC) is calculated as:
A)Total assets − total liabilities
B)Current assets + current liabilities
C)Current assets − current liabilities
D)None of the above
4
Which of the following is an example of liquidity ratios?
A)Times interest earned (TIE)
B)Quick ratio
C)Return on equity
D)Tobin's q
5
If the debt ratio is 0.5 what is the debt-equity ratio?
A)0.5
B)1.0
C)1.5
D)2.0
6
Given the following data: Sales = 2000; Cost of goods sold = 1500; Average total assets = 1600; Average inventory = 100, calculate the asset turnover ratio (or sales-to-asset ratio):
A)1.25
B)0.9375
C)1.33
D)None of the above
7
The denominator in the acid test is
A)cash
B)short term securities
C)receivables
D)current liabilities
8
Which of the following statements is true?
A)Corporate financial models are usually based on accounting concepts.
B)Corporate financial models usually calculate the NPV of the firm's investment plan.
C)Corporate financial models usually calculate the firm's optimal debt ratio.
D)All of the above.
9
A company's stakeholders can be:
A)Stockholders
B)Suppliers
C)Government and community
D)All of the above
10
One of the following is not a fixed asset:
A)Property
B)Plant
C)Inventory
D)Equipment
11
EBIT is calculated as:
A)Total revenue − cost − depreciation
B)Total revenue − cost + depreciation
C)Total revenue − cost − interest
D)None of the above
12
Return-on-assets equal:
A)(EBIT + Tax) / average total assets
B)(EBIT − Tax) / average total assets
C)(EBIT − depreciation) / average total assets
D)(EBIT + depreciation) / average total assets
13
Suppose AD Inc. has 200 million in sales, 150 million in assets at the end of the year, and 120 million in assets at the beginning of the year. The firm's asset turnover ratio is:
A)1.48
B).74
C)1.95
D)can't say, not enough information
14
The Dupont system
A)Links profitability and efficiency ratios
B)Considers that ROA and ROE can be thought of as being comprised of several ratios
C)Provides information about the interaction of ratios
D)All of the above
15
When a firm improves its average collection period it generally:
A)Requires additional cash investment in inventory
B)Releases cash locked up in accounts receivables
C)Does not alter its cash position
D)A firm cannot reduce its inventories







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