Which of the following is NOT true of liquidity ratios?
A) They measure the ability of the firm to meet short-term obligations with short-term assets without putting the firm in financial trouble.
B) There are two commonly used ratios to measure liquidity—current ratio and quick ratio.
C) For manufacturing firms, quick ratios will tend to be much larger than current ratios.
D) The higher the number, the more liquid the firm and the better its ability to pay its short-term bills.
Answer: C
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FIN202 Chapter 4
- There are those that believe that the analysis of financial statements has limitations. Which of the statements below would qualify as a limitation of financial statement analysis?
- Which of the following is not a method of "benchmarking"?
- Why is the quick ratio considered by some to be a better measure of liquidity than the current ratio?
- Which of the following is a benefit of a common-size income statement?
- Limitations of ratio analysis include all but
- Peer group analysis can be performed by
- Which one of the following statements about trend analysis is NOT correct?
- Which one of the following is NOT an advantage of using ROE as a goal?
- Which one of the following is a criticism of equating the goals of maximizing the ROE of a firm and maximizing the firm's shareholder wealth?
- The DuPont equation shows that a firm's ROE is determined by three factors:
- Which one of the following statements is NOT correct?
- For a firm that has both debt and equity,
- For a firm that has no debt in its capital structure,
- Coverage ratios, like times interest earned and cash coverage ratio, allow
- Which one of the following statements is NOT correct?
- If firm A has a higher debt-to-equity ratio than firm B, then
- Which one of the following statements is correct?
- One of the following statements is NOT true of asset turnover ratios.
- Which one of the following statements is NOT true?
- All but one of the following is true about the inventory turnover ratio.
- All else being equal, which one of the following will decrease a firm's current ratio?
- Which one of the following does NOT change a firm's current ratio?
- All but one of the following is true about quick ratios.
- Which of the following is true of ratio analysis?
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