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Exam 8: Business Financial Analysis

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Question 1

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The ________ ratio measures the percentage of the assets of a firm that are owned by the creditors.

A) debt-to-equity
B) debt-to-assets
C) times-interest-earned
D) equity-to-profit

E) A) and C)
F) A) and D)

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Question 2

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In a survey being conducted on a very large set of customers, interviewing every third customer will reflect the opinions of all customers within a small margin of error.

A) True
B) False

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Question 3

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A small business owner needs to concentrate on analyzing business areas that are unique in order to create differences from competitors.

Current ratios are computed by dividing current assets by current liabilities.

To analyze his firm's health, the CEO of Epixore Software tries to determine how quickly the firm's current assets can be turned into cash to cover short-term liabilities.He then subtracts the firm's inventory from the list of current assets to determine if the remaining assets alone could cover short-term liabilities.In the context of ratio analysis, the CEO of Epixore Software is trying to determine his firm's ________ ratio.

List and define the five profitability ratios.

Activity ratios measure the efficiency with which an entrepreneur is handling the resources of his or her business.

In the context of measuring the performance of a business, identify a true statement about deviation analysis.

Describe the importance of surveys to a small business owner.

Identify a true statement about ratio analysis.

A sensitivity analysis tracks an organization's health by comparing its current performance to its past performance.

Short surveys allow a business to gather contextual information that is not easy to categorize about its customers, suppliers, and employees.

The quick ratio is also known as the ________ test.

A business has a limited number of items upon which to perform a financial analysis.

Which of the following statements about having a measurement focus is correct?

In the context of activity ratios, a rise in a firm's rate of inventory turnover indicates that the firm is moving closer to a just-in-time system of inventory management.

Accounts payable turnover examines how fast a company turns credit sales into cash.

Financial ratios measure the short-term ability of a business to meet its obligations.

Leverage ratios are used to examine the relative level of indebtedness of an entrepreneurial business.

Deviation analyses and sensitivity analyses are very similar.