1. Which of the following about financial ratio analysis is True?

a) Financial ratios provide information beyond the accounting data

b) Financial ratios are only meaningful if they are compared to the same ratios from previous ears or of other firms or industry benchmarks.

c) Industry averages are reliable benchmarks in comparing firms' financial ratio

d) There are standardized categories of financial ratios that analysts must follow

2 Which of the following about financial ratios is FALSE?

a) Profit margins are calculated as some kind of profit over sales

b) Asset turnovers are calculated as some kind of asset over sales

c) Return on equity is net income over common equity, return on assets is net income over total assets.

d) Quick ratio (aka acid-test-ratio) is affected by inventory

3 When comparing inventory turnover ratios, other things being equal,

a) a lower inventory turnover is preferred in order to keep inventory costs low

b) a higher inventory turnover is preferred to improve asset utilization

c) higher inventory turnover may result from the old or obsolete inventory that increase the inventory balance on the balance sheet

d) higher inventory turnover may result from an increase in the selling price of the product

4 The current ratio of a firm would be increased by which of the following?

a) Land held for investment is sold for cash

b) Equipment is purchased, financed by a long-term debt issue

c) Inventories are sold for cash

d) Inventories are sold on a credit basis