11.Which of the following may be a limitation of financial statements?
a. Subject to biases of management
b. Provides no information on the company’s accounting methods
c. Typically reflects the view of inherently unethical managers
d. Communicates only market values and no historical information
12.Which one of the following is a reason a company’s reported book value and its true value may differ?
a. Management calculates net worth different than shareholders.
b.GAAP requires too many estimates.
c.Statements are forward-looking.
d.Statements do not reflect the company’s prospects within its business environment.
13.The current ratio helps assess a company’s
a. profitability.
b. asset turnover.
c. capital structure leverage.
d. solvency.
14.Return on equity helps assess a company’s
a. marketability.
b. solvency.
c. profitability.
d. leverage.
15.The quick ratio helps assess a company’s
a. annual stock price.
b. solvency.
c. inventory turnover.
d. profit during the current period.
16.The dividend yield ratio helps assess the
a. profitability of the current year.
b. cash return on a shareholders’ investment.
c. company’s ability to pay its current liabilities as they come due.
d. solvency of a company.
17.Which of the following ratios would be of primary importance to a manager in evaluating the success of a new policy of reducing the stock of goods needed to meet customer demand?
a. Total asset turnover
b. Fixed assets turnover
c. Receivables turnover
d. Inventory turnover
18.Which of the following ratios might a potential investor use to determine if the return to shareholders is a large portion of the total return generated by a company?
a. Earnings per share
b. Common equity leverage
c. Current ratio
d.Total asset turnover
19.Assessing a company’s inventory turnover helps assess the
a. effectiveness of a company’s collection activities.
b. ability to measure the quality of the inventory on hand.
c. speed at which inventories move through operations.
d. efficiency of a company.
20.Which of the following ratios would be of primary importance to a supplier in deciding to extend credit for goods delivered?
a. Earnings per share
b. Debt/equity ratio
c. Accounts receivable turnover
d. Quick ratio