Financial Management

771. Short- term financing plans with high liquidity have:

  1. High return and high risk
  2. Moderate return and moderate risk
  3. Low profit and low risk
  4. None of the above
Correct answer: (B)
Moderate return and moderate risk

772. An example of current asset

  1. Cash
  2. Debtors
  3. Marketable securities
  4. All
Correct answer: (D)
All

773. Generally, the most important category on the statement of cash flows is cash flows from

  1. operating activities
  2. investing activities
  3. financing activities
  4. significant noncash activities
Correct answer: (A)
operating activities

774. Which of the following would be added to net income using the indirect method?

  1. An increase in accounts receivable
  2. An increase in prepaid expenses
  3. Depreciation expense
  4. A decrease in accounts payable
Correct answer: (C)
Depreciation expense

775. The degree of solvency of two firms can be compared by measuring

  1. Net worth
  2. Tangible Net Worth
  3. Asset coverage ratio
  4. Solvency Ratio
Correct answer: (D)
Solvency Ratio

776. Which of the following tools and techniques are the most useful to the financial statement analyst?

  1. Public relations material and pro forma statements prepared by the firm
  2. Common size financial statements and financial ratios
  3. The letter to the shareholders and a map
  4. None of the above
Correct answer: (B)
Common size financial statements and financial ratios

777. Inventory Turnover measures the relationship of inventory with:

  1. Average Sales
  2. Cost of Goods Sold
  3. Total Purchases
  4. Total Assets
Correct answer: (B)
Cost of Goods Sold

778. Which of the following statements is correct?

  1. A Higher Receivable Turnover is not desirable
  2. Interest Coverage Ratio depends upon Tax Rate
  3. Increase in Net Profit Ratio means increase in Sales
  4. 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?

  1. Solvency
  2. Liquidity
  3. Profitability
  4. Turnover
Correct answer: (A)
Solvency
Page 78 of 78