Analyze a companv's liquidity principally by examining

A. The relationship between a company's current assets and its current liabiles.

R. The relationship between owners' equity and current liabilities

c. The rate at which a company is funding operating costs with debt as opposed to owners' equity.

D. Industry liquidity trends

Industries are distinctive in such financial characteristics as:

I. Asset distribution I. Asset Turnover Ill. Profitability IV. Leverage and liability structure

A. I&II

B. II& III

C. I,I, & IV

D. I, II, Ill, & IV

All of the following ratios are used to measure leverage in a business EXCEPT:

A. Total liabilities/ net worth

B. Net fixed assets/ net worth less intangible assets

C. Total assets/ total liabilities less intangible assets

D. Total liabilities less subordinated debt/ net worth plus subordinated debt

Answers the question: How is a company's net worth concentrated, and what kinds of assets would need to be liquidated to satisfy all creditors?

A. Debt-to-Tangible Net Worth

B. Debt-to-Worth

c. Net Fixed Assets to Tangible Net Worth

D. Leverage Considering Subordinated Debt as Net Worth

If a business reports an increase in working capital from one year to the next, which or the rollowing are true about the business?

1. The business has more current assets to meet current liabilities than in the prior year Il. Current assets have more support from long-term funding sources than in the prior year II. The business has lower noncurrent assets than in the prior year IV. The business has higher levels of cash and equivalents than in the prior

year

A. I&II

B. I& Ill

C. Ill. &IV

D. Il, IlI, & IV

Leverage measures DO NOT:

I. Determine repayment ability. Il. Indicate if asset and liability levels are appropriate. IIl. Measure cash flow. IV. Provide a means of gauging the degree of risk associated with lending to the company.

A. I&II

B. II & III

C. I, II, & Ill

D. III,IV

What is the current ratio for a company with:

*Total current assets of 9,376 Total noncurrent assets of 18,227 Total current liabilities of 3,490 Total noncurrent liabilities of 10,157

A. 0.37

B. 2.69

c. 1.79

D. 5.22

To calculate effective tangible net worth, an analyst should make all of the following adjustments EXCEPT:

A. Subtract intangible assets from net worth

B. Subtract subordinated debt from liabilities

c. Add intangible assets to liabilities

D. Add subordinated debt to net worth

When assessing the liquidity of a company, which of the following is the most conservative measure?

A. Net working capital

B. Quick ratio

c. Current ratio

D. Working capital/sale

A company with a liability structure that is well matched to its asset distribution can usually operate with

A. higher leverage

B. lower leverage

c. no leverage

D. increased liquidity

5. When evaluating a company's current assets, which of the following are expected to convert to cash during the operating cycle?

I. Accounts receivable I. Inventory Ill. Prepaid expenses IV. Deferred tax assets

A. 1&11

B. I&

c. 1, 11, & III

D. I, I, III, & IV

Which of the following circumstances may increase a company's leverage?

I. The company borrows to buy back a retiring owner's stock in the company Il. The company shifts its liabilities from mostly long-term to mostly current Ill. The company increases its net worth by retaining profits without increasing assets IV. The company has three years of losses

A. I&Il

B. 11& Ill

c. 1& IV

D. II1 & IV

Answers the question: How much could current assets shrink in value from balance sheet amounts before they would be inadequate to cover current liabilities?

A. Quick Ratio

B. Current Ratio

c. Working Capital

D. Debt-to-Worth

Of the following businesses, which is most likely to have the highest percentage of its assets in the form of fixed assets?

A. A company that makes auto parts

B. A company that distributes beverages

C. A company that sells children's clothing

D. A company that provides decorating services