1.Identify two ratios that are used to analyze a firm's liquidity position, and write out their equations.

2.What are the characteristics of a liquid asset? Give some examples.

3.Identify four ratios that are used to measure how effectively a firm is managing its assets, and write out their equations.

4.How might rapid growth distort the inventory turnover ratio?

5.What potential problem might arise when comparing different firms' fixed assets turnover ratios?

6.In what way do taxes influence a firm's willingness to finance with debt?

7.Name three ratios that are used to measure the extent to which a firm uses financial leverage, and write out their equations.

8.Identify and write out the equations for four ratios that show the combined effects of liquidity, asset management, and debt management on profitability.

9.What does ROE measure? Since interest expense lowers profits, does using debt lower ROE?

10.Describe three ratios that relate a firm's stock price to its earnings, cash flow, and book value per share, and write out their equations.