1.

Which of the following generally indicates a positive change?

a.The acid-test ratio decreases.

b.Earnings per share decreases.

c.The number of days' sales in inventory decreases.

d.The debt service coverage decreases.

2.

Because of its relationship to dividends and market price, which ratio is important to investors?

a.Price/earnings ratio.

b.Asset turnover ratio.

c.Current ratio.

d.Debt-to-equity ratio.

3.

Trend analysis is analysis

a.in which a statistic is calculated for the relationship between two items on a single financial statement or for two items on different financial statements.

b.in which all items are presented as a percentage of one selected item on a financial statement.

c.of dollar changes and percentage changes over several years.

d.of all ratios that increased or decreased over past accounting periods.

4.

The acid-test ratio differs from the current ratio in that it

a.signals the need to liquidate marketable securities when it drops below 5 to 1.

b.represents the amount of cash on hand instead of the amount of working capital.

c.is a stricter test of a company's ability to pay its current debts as they are due.

d.excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible nonpayment.

5.

Which of the following is true regarding the relationship of the current ratio to the quick ratio?

a.The current ratio is based on a more conservative measure of liquidity.

b.Both focus on the relationship between all of the firm's current assets and part or all of its current liabilities.

c.For a company in the service industry, the current ratio and quick ratio will be significantly different.

d.Both focus on the relationship between part or all of the firm's current assets and all of its current liabilities.