Quiz Ch 04 – T/F Evaluating Operating Margin
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: The operating margin gauges the efficiency of operating income relative to assets.
True or false: The operating margin gauges the efficiency of operating income relative to assets.
True or false: The return on invested capital quantifies the comprehensive return a company has delivered to its investors.
True or false: Should a firm vend inventory for cash and retain the proceeds in its bank account, the current ratio is likely to remain relatively stable, while the quick ratio would likely decrease.
True or false: When a firm’s fixed assets turnover ratio greatly surpasses the industry average, it may suggest efficient fixed assets utilization or potential overcapacity, implying a potential need for additional fixed assets.
True or false: A reduction in a firm’s inventory turnover ratio indicates an enhancement in both inventory management and liquidity, signifying increased liquidity.
True or false: Elevated current and quick ratios consistently signify effective liquidity management by the firm.
True or false: When a firm opts to sell inventory on credit rather than cash, there is no compelling reason to anticipate changes in either its current or quick ratio.
True or false: While a comprehensive liquidity analysis involves a cash budget, the current and quick ratios offer quick and user-friendly approximations of a company’s liquidity status.
True or false: Typically, it’s more favorable to maintain a low inventory turnover ratio than a high one. A lower ratio indicates that the firm holds an ample inventory compared to sales, preventing sales loss due to inventory shortages.
True or false: Profitability ratios depict the integrated outcomes of liquidity, asset management, and debt management on a firm’s operational outcomes.