Which of the following does not indicate increasing overall liquidity? an increasing current ratio an increasing quick ratio an increasing cash flow liquidity ratio an increasing cash conversion cycle

What is the relationship between the average collection period and accounts receivable turnover? When average collection period increases, the accounts receivable turnover decreases. Both ratios are expressed in number of days. Both ratios are expressed in number of times receivables are collected per year. All of the above are correct.

Firms have several practical ways of managing their overall liquidity. True False

Small firms may have more difficulty in getting the capital structure they want than do large, publicly-traded firms. True False

Using financial leverage in funding the firm results in magnified returns, that is, return on equity will more than double if operating earnings double, but will drop by more than half if operating earnings are cut in half True False

A firm has the following financial data for a particular fiscal year: Sales for the year $3,000 Some year-end balance sheet figures: Cash $350 Accounts Receivable $750 Inventory $1,200 ------ Total Current Assets $2,300 Total Current Liabilities $1,500 The firms current ratio, quick ratio, and average collection period are (in order; use a 365-day year): 1.53, 0.73, 91.25 days 0.73, 2.00, 75.00 days 1.53, 0.73, 146.00 days 0.73, 1.53, 146.00 days

Why do firms use debt as part of their financing strategy? Debt is a safer way to finance the firm than equity Debt financing results in lower returns to equity Debt financing is a way of fooling creditors Debt financing is cheaper than equity financing

In comparing a debtors ratios to an industry average, which of the following conditions would make a debtor a greater credit risk than average? higher debt as a proportion of total financing lower total liquidity Both a and b Neither a nor b

Cash flow ratios add to a financial statement analysis by measuring whether accounting profits result in cash flows. True False

In analyzing a debtor, a trade creditor is primarily concerned with the debtors profitability. True False