Answers to Final Exams



Download 181.5 Kb.
Page1/33
Date21.11.2022
Size181.5 Kb.
#60007
  1   2   3   4   5   6   7   8   9   ...   33
Answers-to-Final-Exams

Answers to Final Exams – Short Courses located at www.exinfm.com/training
Course 1 – Evaluating Financial Performance



  1. Which ratio is best used for measuring how well management did in managing the funds provided by shareholders?

  1. Profit Margin

  2. Debt to Equity

  3. Return on Equity

  4. Inventory Turnover

Answer = c: Shareholders are interested in the return a business generates on the money the shareholder has invested. Therefore, answer c – Return on Equity is correct. Shareholders tend to focus on long term returns vs. managers who focus on profitability. Answer a – Profit Margin would be more applicable to Managers. Financial Managers and people interested in assessing risk would be interested in b – Debt to Equity. Mangers, primarily interested in inventory management, would be interested in d – Inventory Turnover.

  1. If sales are $ 600,000 and assets are $ 400,000, then asset turnover is:

  1. .67

  2. 1.50

  3. 2.00

  4. 3.50

Answer = b: The British often refer to sales as turnover since the ultimate reason a business invests in assets is to turn over the asset dollar into a sales dollar. If we divide sales of $ 600,000 by $ 400,000 we get 1.5 – answer is thus b. Average assets is often used in the denominator of the ratio. This tells us for every $ 1.00 we invested into assets, we were able to turn this into $ 1.50 of sales.

  1. An extremely high current ratio implies:

  1. Management is not investing idle assets productively.

  2. Current assets have been depleted and the company is insolvent.

  3. Total assets are earning a very low rate of return.

  4. Current liabilities are higher than current assets.


Download 181.5 Kb.

Share with your friends:
  1   2   3   4   5   6   7   8   9   ...   33




The database is protected by copyright ©ininet.org 2022
send message

    Main page