QUESTION 1 Which of the following statements is true? O The investment analyst uses historical financial statement data to forecast the future with the ultimate objective to determine whether the investment is sound. O A creditor is ultimately concerned with the company's performance record, risk inherent in the capital structure, and the competitive position of the company A creditor's objective is ultimately concerned with estimating a company's future earnings. An investor's objective is to determine the ability of a firm to make interest and principal payments. O QUESTION 2 All of the following are limitations of financial ratios except O There are no rules of thumb that apply to the interpretation of financial ratios. C There is no one definitive set of financial ratios and there is no uniform definition for all ratios. Financial ratios are not predictive Financial ratios can serve as screening devices, indicate areas of potential strength or weakness and reveal matters that need further investigation. QUESTION 3 Activity ratios measure O the ability to cover debt and fixed interest and lease payments. O the liquidity of specific liabilities and the efficiency of managing debt. O the overall performance of a firm and its efficiency in managing assets, liabilities, and equity O the liquidity of specific assets and the efficiency of managing assets