Question1

If Days Sales in Receivables (DSR) is materially longer than my company's credit terms to its customers, this may indicate a collection problem. Select one:

TrueFalse

Question2

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The only way a company can increase its operating profits per asset dollar is to expand the amount of sales generated from each asset dollar. Select one:

TrueFalse

Question3

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Operating leases are financial statement examples of "off-balance sheet" financing. Select one:

TrueFalse

Question4

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My company uses LIFO to account for its inventory cost flow. At the end of the year, my inventory is valued on the balance sheet at $1,200,000 and my company's LIFO Reserve is $200,000. If my company used FIFO instead of LIFO, the value of its inventory at the end of the year would have been approximately $1,000,000. Select one:

TrueFalse

Question5

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My company is being sued. It is very likely that we will lose the lawsuit and that the lawsuit will cost us approximately $1,000,000. We should recognize this lawsuit as a liability on our balance sheet. Select one:

TrueFalse

Question6

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To remain in accordance with GAAP, operating leases require footnote disclosure of the future cash flows arising from operating leases. Select one:

TrueFalse

Question7

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If a company leases assets and its leased assets are all accounted for as Capital Leases, as an analyst I should turn to the Income Statement and look for "Rent Expense" to assess the impact of these capital leases on the company's financials. Select one:

TrueFalse

Question8

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The price to earnings ratio (P/E ratio) relates the prices a company charges for its products to the company's earnings. Select one:

TrueFalse

Question9

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Increasing my level of debt relative to equity will lead to a decrease in my Return on Equity because of interest expense and its drag on my bottom-line profit. Select one:

TrueFalse

Question10

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Compared to a firm with a capital lease, operating leases help the lessee firm (the firm that is leasing the item) earn a higher return on assets. Select one:

TrueFalse

Question11

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The term "LIFO liquidation" refers to the transition period when a company converts its inventory accounting system from LIFO to FIFO. Select one:

TrueFalse

Question12

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If I know my company's debt ratio, I can calculate/determine the relative proportion of total equity that is in my company's capital structure. Select one:

TrueFalse

Question13

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Firms that use LIFO must disclose the dollar magnitude of the difference between LIFO and FIFO cost. Select one:

TrueFalse

Question14

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Earning's measurements like EBITDA ignore some real business costs and can result in an incomplete picture of a company's true profitability. Select one:

TrueFalse

Question15

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Times Interest Earned (TIE) indicates a firm's long-term debt-paying ability from the balance sheet point of view. Select one:

TrueFalse

Question16

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Financial leverage is beneficial when the company earns more than the incremental after-tax cost of debt. Select one:

TrueFalse

Question17

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A company that has no debt will have a financial leverage ratio of 1.0. Select one:

TrueFalse

Question18

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A steadily rising Days Sales in Inventory (DSI) that exceeds industry averages is generally considered to be a favorable trend. Select one:

TrueFalse

Question19

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Before computing ROA, analysts isolate a company's sustainable operating profits by removing non-operating or nonrecurring items from reported income. Select one:

TrueFalse

Question20

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The distortion of the Current ratio caused by using LIFO inventory costing may be adjusted by subtracting the LIFO reserve from current assets. Select one:

TrueFalse