Financial Management
Receivables turnover is:
a profitability ratio
a debt utilization ratio
an asset utilization ratio
a liquidity ratio
an asset utilization ratio
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Financial ratios are used to:A. weigh and evaluate the operating performance of the firm
B. provide an absolute benchmark of industry performance
C. determine which firm will provide the highest return to investors
D. None of the above are correct
The construction of the pro forma income statement is based on:
A. the prior year’s income statement
B. sales projections and the production plan
C. the cash budget
D. the cash budget and prior year’s income statement
The primary purpose of the cash budget is:
A. to break the income statement down into monthly periods
B. to determine monthly cash receipts
C. to determine the collection pattern
D. to allow the firm to anticipate the need for outside funding
Operating leverage may be defined as:
A. the degree to which debt is used in financing the firm
B. the difference between price and variable costs
C. the extent to which capital assets and fixed costs are utilized
D. the difference between fixed costs and the contribution margin
Financial leverage:
A. reflects the firm’s commitment to fixed, financial assets
B. has no impact on the earning of the firm
C. reflects the amount of debt used in the capital structure of the firm
D. primarily affects the left side of the balance sheet
11. Most retail stores are mainly concerned with:
A. their buyers’ forecasts for the coming season
B. matching sales and inventory levels
C. decreasing inventory turnover
D. their investment in capital assets
The liquidity premium theory suggests that long-term interest rates are higher than short-term interest rates because:
A. investors generally prefer to invest short periods of time
B. government policy maintains this relationship
C. there is greater risk in long-term bonds
D. exchange rate fluctuations establish this relationship
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