1. What does a low asset turnover compared to the industry imply? a. The investment in assets may be too high b. Sales are higher than average c. The investment in assets is too low d. Net income is low relative to the investment in assets

2. All of the following are steps of a financial statement analysis except: a. Establish objectives of the analysis b. Prepare pro forma statements c. Study the industry in which the firm operates d. Develop knowledge of the firm and the quality of management

3. Which ratios help assess the firms ability to meet cash needs as they arise? a. Current ratio and cash flow liquidity ratio b. Average collection period and net profit margin c. Debt ratio and dividend payout d. Operating profit margin and return on equity

4. Which of the following statements is true? a. It is unnecessary to analyze operating expenses over which management exercise discretion b. Impairment charges do not need to be analyzed since they are generally a non-recurring expense c. A good way to improve operating profit is to cut repairs and maintenance costs as much as possible d. Operating expenses can be easily analyzed by preparing a common size income statement

5. What does a financial leverage index greater than one indicate about a firm? a. Return on assets exceeds the return on equity b. Return on equity exceeds the return on assets c. The firm is not employing debt successfully d. The firm does not generate enough funds to cover interest payments