Quiz Ch 04 – Strengthening Current Ratio
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
To bolster a firm’s financial standing, which action would elevate its current ratio?
To bolster a firm’s financial standing, which action would elevate its current ratio?
True or false: The days sales outstanding (DSO) provides the average collection time after a sale. Comparing DSO with the firm’s credit terms indicates whether customers are adhering to timely payments.
True or false: The profit margin evaluates net income in relation to sales.
True or false: Debt management ratios reflect how much a firm’s managers aim to enhance returns on owners’ capital by employing financial leverage.
True or false: The times-interest-earned ratio evaluates how much operating income can decrease before the firm becomes incapable of covering its yearly interest expenses.
True or false: Differences in accounting methods among firms create obstacles for meaningful ratio comparisons between firms, more so than if all firms adopted the same or similar accounting methods.
True or false: Greater managerial conservatism often correlates with a higher total debt to total capital ratio [(Short-term debt + Long-term debt)/(Debt + Preferred stock + Common equity)].
True or false: Both the current and quick ratios gauge a company’s liquidity. The current ratio evaluates the correlation between a firm’s present assets and its current debts, while the quick ratio appraises the company’s capacity to settle short-term liabilities without depending on inventory sales.
True or false: The inventory turnover ratio and days sales outstanding (DSO) are two ratios utilized to evaluate the efficiency of a firm’s current asset management.
True or false: In the event of a firm selling inventory on credit, the current ratio is expected to undergo minimal change, while the quick ratio would likely rise.