Financial Management
771. Short- term financing plans with high liquidity have:
- High return and high risk
- Moderate return and moderate risk
- Low profit and low risk
- None of the above
Correct answer: (B)
Moderate return and moderate risk
772. An example of current asset
- Cash
- Debtors
- Marketable securities
- All
Correct answer: (D)
All
773. Generally, the most important category on the statement of cash flows is cash flows from
- operating activities
- investing activities
- financing activities
- significant noncash activities
Correct answer: (A)
operating activities
774. Which of the following would be added to net income using the indirect method?
- An increase in accounts receivable
- An increase in prepaid expenses
- Depreciation expense
- A decrease in accounts payable
Correct answer: (C)
Depreciation expense
775. The degree of solvency of two firms can be compared by measuring
- Net worth
- Tangible Net Worth
- Asset coverage ratio
- Solvency Ratio
Correct answer: (D)
Solvency Ratio
776. Which of the following tools and techniques are the most useful to the financial statement analyst?
- Public relations material and pro forma statements prepared by the firm
- Common size financial statements and financial ratios
- The letter to the shareholders and a map
- None of the above
Correct answer: (B)
Common size financial statements and financial ratios
777. Inventory Turnover measures the relationship of inventory with:
- Average Sales
- Cost of Goods Sold
- Total Purchases
- Total Assets
Correct answer: (B)
Cost of Goods Sold
778. Which of the following statements is correct?
- A Higher Receivable Turnover is not desirable
- Interest Coverage Ratio depends upon Tax Rate
- Increase in Net Profit Ratio means increase in Sales
- Lower Debt-Equity Ratio means lower Financial Risk
Correct answer: (D)
Lower Debt-Equity Ratio means lower Financial Risk
779. Ratio Analysis can be used to study liquidity, turnover, profitability, etc. of a firm. What does Debt-Equity Ratio help to study?
- Solvency
- Liquidity
- Profitability
- Turnover
Correct answer: (A)
Solvency