1. Mobile's inv turnover is
   a. 7.46
   b. 11.83
   c. 6.16
   d. 5.62

c. 6.16

2. The best indicator for assessing a firm's long term solvency risk is its ability to generate what over a period of years?
   a. sales
   b. earnings
   c. positive cash flows
   d. Income from continuing operations

b. earnings

3. Which of the following ratios is not a measure of long term solvency risk?
   a. debt/ equity
   b. interest coverage
   c. operating cash flows to current liabilities ratio
   d. Liabilities to assets

c. operating cash flows to current liabilities

4. Which of the following states of financial distress would be considered the most troubling for an investor or creditor?
   a. failing to make a required interest payment on time
   b. paying an accounts payable after the billing date
   c. restructuring debt
   d. defaulting on a principal payment

d. defaulting on a principal payment

5. Doran corp has a current ratio of 6. Under which of the following scenarios might this indicate a problem?
   a. inventories are increasing due to the into of a new product
   b. the company is holding cash in expectation of making a large investment in equipment
   c. receivables are increasing due to increasing sales
   d. inventories are increasing and the industry in which Doran operates is experiencing a recession

d. inventories are increasing and the industry is in a recession

6. Which of the following can companies use as collateral for a loan?

PPE

7. What is the order of increasing gravity when assessing credit risk?

Failure to make interest payment on time
Restructuring debt
defaulting on principal payment
filing for bankruptcy
liquidation

8. Which of the following properly links the factors affecting a firms ability to generate cash with its need to use cash in operations?

ability to generate cash- profitability of goods and services sold
Need to use cash- working capital requirements

9. Which of the following properly links the factors affecting a firms ability to generate cash with its need to use cash in investing?

ability to generate cash- sales of existing plant assets
need to use cash- plant capacity requirements

10. Which of the following properly links the factors affecting a firms ability to generate cash with its need to use cash in financing?

ability to generate cash- borrowing capacity
need to use cash- debt service requirements

11. Hammer corp wrote off $185k of obsolete inventory. What effect did this write off have on the company's current and quick ratios?

The write off of obsolete inventory would decrease Hammer's current ratio because it decreases current assets

The quick ratio would be unaffected because inventory is not included in the calculation