1. The days sales outstanding (DSO) ratio of a firm identifies:

a. how much investors are willing to pay for the firm's stock for each dollar of reported profits.

b. the profit (earnings) per dollar of sales.

c. how effectively the firm uses its plant and equipment to help generate sales.

d. the extent to which a firm's net operating income can safely decline.

e. the average length of time a firm must wait after making a credit sale before receiving cash.

2.A bond's value will increase with increases in interest rate over time.

a. True

b. False

3. The P/E ratio gives an indication of _____.

a. the par value of a stock

b. a firm's debt position

c. the payback period of a stock

d. the maturity value of a stock

e. a stock's dividend yield

4. A limitation of ratio analysis is that:

a. statistical procedures are considered to analyze the net effects of a set of ratios.

b. it is useful only for large, multidivisional firms.

c. inflation, which distorts the firm's balance sheet, is considered when calculating ratios.

d. window-dressing techniques will change the ratios of a firm.

e. seasonal factors that distort the firm's balance sheet are taken into account when calculating ratios.