Homework answers / question archive / Royal Melbourne Institute of Technology BAFI 1045 Topic 5 1)The comparison with which ratios should be made include the following, except ;   a)            The firm’s own past performance b)            The firm’s major competitor within the industry c)            The firm’s suppliers and customer d)            The firm’s industry or industries e)            The aggregate economy   2

Royal Melbourne Institute of Technology BAFI 1045 Topic 5 1)The comparison with which ratios should be made include the following, except ;   a)            The firm’s own past performance b)            The firm’s major competitor within the industry c)            The firm’s suppliers and customer d)            The firm’s industry or industries e)            The aggregate economy   2

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Royal Melbourne Institute of Technology

BAFI 1045

Topic 5

1)The comparison with which ratios should be made include the following, except ;

 

a)            The firm’s own past performance

b)            The firm’s major competitor within the industry

c)            The firm’s suppliers and customer

d)            The firm’s industry or industries

e)            The aggregate economy

 

2.            The five major classes of ratios include the following , except

 

a)            Internal liquidity

b)            Risk analysis

c)            Growth analysis

d)            Market performance

e)            Operation performance

 

3.            Which of the following is not a flow ratio?

 

a)            Interest coverage

b)            Fixed charge coverage

c)            Debt/equity

d)            Cash flow/long term debt

e)            Cash flow/total debt

 

4.            Which ratio is considered an internal liquidity ratio?

 

 

 

5.            Operation performance is divided into which two subcategories of ratios?

 

 

 

6.            Which of the following is not a component of return on equity (ROE ) ?

 

a)            Net income/sales

b)            Total assets/equity

c)            Equity/sale

d)            Sales/total assets

e)            Net profit margin

 

7.            which equation is valid?

 

 

 

8.            Determinants of market liquidity include all except the

 

a)            Number of shares traded

b)            Dollar value of shares traded

c)            Bid-ask spread

d)            Number of security owners

e)            Market price per share

 

9.            which of the following is not a use of financial ratios?

 

a)            Assigning credit quality ratings on bonds

b)            Predicting insolvency

c)            Identification of internal corporate variables that affect a stock’s systematic risk

d)            None of the above ( that is a, all are uses of financial ratios )

 

10.          Limitations on the use of ratios include

 

a)            Accounting comparability

b)            Company homogeneity

c)            Consistent results

d)            A reasonable range within the industry

e)            All of the above

 

11.          business risk is a function of

 

a)            Sales Variability

b)            Operating leverage

c)            Financial leverage

d)            Choices a and b

e)            Choices b and c

 

12.          A common-size balance sheet expresses all balance sheet items

 

 

 

13.          A common-size income statement expresses all income statement items e

 

14.          An estimate of the discounted value of future lease payments can be obtained by:

 

a)            discounting future lease payments at the firm’s cost of debt

b)            discounting future lease payment at the firm’s cost of capital

c)            applying a multiple to forthcoming minimum lease payments

d)            choices a or b

e)            choice a or c

 

15.          financial risk is the additional uncertainty of returns to equity holders due to

 

 

 

16.          the market liquidity of a security can be measured using

 

a)            trading turnover

b)            bit-ask spread

c)            price of the security

d)            choice a and b

e)            choices b and c

 

17.          which of the following factors would be an indicative of high quality earnings?

 

a)            Earnings are close to cash

b)            Earnings are the result of repeat business

c)            Revenue recognition is based on the installment principle

d)            All of the above

 

18.          Which of the following factors would be indicative of a high quality balance sheet?

 

 

 

19.          Which of the following ratios is not a measurement of the firm’s liquidity?

 

 

 

20.          DuPont Analysis breaks down return on equity into major areas that can be used to identify a firm’s strengths or weaknesses with respect to

 

 

21.          Which of the following statements regarding financial risk and business risk is true