Financial Management: Theory and Practice

Powerful Essays
8763 Words
Grammar
Plagiarism
Writing
Score
Financial Management: Theory and Practice
------------------------------------------------- CHAPTER 3
ANALYSIS OF FINANCIAL STATEMENTS

Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject lines.

True/False Easy: We tell our students (1) that to answer some of these questions it is useful to write out the relevant ratio or ratios, then think about how the ratios would change if the accounting data changed, and (2) that sometimes it is useful to make up illustrative data to help see what would happen. | | | | | | (3.1) Ratio analysis F K | Answer: a | EASY | . | Ratio analysis involves analyzing financial statements in order to appraise a firm 's financial position and strength. | | | | | | | | | | | | a. | True | | | | | | | | | b. | False | | | | | | | | | | | | | | | | | | | (3.2) Liquidity ratios F K | Answer: a | EASY | . | The current ratio and inventory turnover ratios both help us measure the firm 's liquidity. The current ratio measures the relationship of a firm 's current assets to its current liabilities, while the inventory turnover ratio gives us an indication of how long it takes the firm to convert its inventory into cash. | | | | | | | | | | | | a. | True | | | | | | | | | b. | False | | | | | | | | | | | | | | | | | | | (3.2) Liquidity ratios F K | Answer: a | EASY | . | Although a full liquidity analysis requires the use of a cash budget, the current and quick ratios provide fast and easy-to-use measures of a firm 's liquidity position. | | | | | | | | | | | a. | True | | | | | | | | | b. | False | | | | | | | | | | | | | | | | | | | | (3.2) Current ratio F K | Answer: b | EASY | . | High current and quick ratios always indicate that a firm is managing its liquidity position well. | | | | | | | | | | | | a. |

You May Also Find These Documents Helpful

• Satisfactory Essays

fin 341

• 363 Words
• 2 Pages

Inventory turnover ratios show the number of times a company’s inventory is “turned over” in a year. KR’s turnover ratio is 18.80 where as WFM has an inventory ratio of 31.28, which show that KR seems to have a better…

• 363 Words
• 2 Pages
Satisfactory Essays
• Good Essays

Liquidity Ratios: Show the company’s ability to pay of its current liabilities from its current assets.…

• 616 Words
• 4 Pages
Good Essays
• Satisfactory Essays

• 467 Words
• 2 Pages
Satisfactory Essays
• Better Essays

Xacc 280 Final

• 1225 Words
• 5 Pages

Liquidity measures a company’s ability to pay their debts when they are due. It is identified as a ratio or percentage of the current liabilities and calculated by dividing the current cash by the current liabilities. It is a fast way to understand if the company’s future is appealing to the investor. If the company is not turning a profit quick enough, it may be a sign of liquidity problems. This is the primary reason why an investor should compare two competitors while looking at the liquidity ratio.…

• 1225 Words
• 5 Pages
Better Essays
• Powerful Essays

final

• 1681 Words
• 8 Pages

The current ratio is used to calculate organizations liquidity, or the extent to which the agency has…

• 1681 Words
• 8 Pages
Powerful Essays
• Powerful Essays

of companies. Another ratio that is helpful to determine a company’s liquidity is the Current…

• 2124 Words
• 9 Pages
Powerful Essays
• Satisfactory Essays

Question 1 1 out of 1 points Ice in his veins is an example of a Answer Selected Answer: b. Metaphor Correct Answer: b. Metaphor Question 2 1 out of 1 points Rapid movements back and forth in time are called: Answer Selected Answer: c. flashbacks Correct Answer: c. flashbacks Question 3 1 out of 1 points Lyubov and Gaev take decisive action to save the cherry orchard. Answer Selected Answer: b. FALSE Correct Answer: b. FALSE Question 4 1 out of 1 points The first challenge to theater as a dramatic medium came from:…

• 674 Words
• 3 Pages
Satisfactory Essays
• Powerful Essays

| Hint: Get the contribution per barrel of Mountain Man Light In the second work sheet…

• 701 Words
• 3 Pages
Powerful Essays
• Better Essays

We often think of ratios as being useful (1) to managers to help run the business, (2) to bankers for credit analysis and (3) to stock-holders for stock valuation. These different types of analysts would not have an equal interest in the liquidity ratios.…

• 1372 Words
• 6 Pages
Better Essays
• Good Essays

Haha

• 723 Words
• 3 Pages

Feedback: Remanufacturing implies refurbishing and reselling a product; recycling implies reclaiming products for a different use (e.g., using paper to make cardboard).…

• 723 Words
• 3 Pages
Good Essays
• Good Essays

Liquidity ratios look at a company ability to turn an asset into cash quickly so they are able to pay their bills without adding undue stress. This is very important to creditors who are seeking payments. “To a creditor, particularly a short-term creditor such as a supplier, the higher the current ratio the better. This is because a higher current ratio indicates liquidity” (Ross, Westerfield, & Jordan, 2011). Two ratios that I looked at for McDonald’s are current and quick ratios. The first liquidity ratio that I looked at is the current ratio.…

• 2837 Words
• 22 Pages
Good Essays
• Better Essays

The liquidity Ratios: These ratios are used to find out “how much ready cash or near cash a company has?” Some of the liquidity ratios are 1) Current ratio 2) Quick ratio…

• 1057 Words
• 5 Pages
Better Essays
• Powerful Essays

At Florida, we find a significant difference in preparation between our accounting and non-accounting students. The accountants are relatively familiar with financial statements, and they have covered in depth in their financial accounting course many of the ratios dealt with in Chapter 3. We pitch our lectures to the non-accountants, which means concentrating on the use of statements and ratios, and the “big picture,” rather than on details such as seasonal adjustments and the effects of different accounting procedures. Details are important, but so are general principles, and there are courses other than the introductory finance course where details can be addressed.…

• 7477 Words
• 30 Pages
Powerful Essays
• Good Essays

Financial ratios also are used to project a firm’s future financial position. We call this activity financial planning.…

• 4765 Words
• 20 Pages
Good Essays
• Powerful Essays

Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business…

• 990 Words
• 4 Pages
Powerful Essays