Assignment 3-9
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) Answe Ratio r: a analy sis EASY
1
.
F K Ratio analysis involves analyzing financial statements in order to appraise a firm's financial position and strength. a. b. True False (3.2) Answe Liqui r: a dity ratio s EASY
2
.
F K The current ratio and inventory turnover ratios both help
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 3: Financial Analysis
True/False
Page 1
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. b. True False (3.2) Answe Liqui r: a dity ratio s EASY
3
.
F K 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. True Fals e
a. b.
(3.2) Answe Curre r: b nt ratio
EASY
4
. a. b.
F K High current and quick ratios always indicate that a firm is managing its liquidity position well. True False
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Page 2
True/False
Chapter 3: Financial Analysis
(3.3) Answe Asset r: a manag ement ratio s
5
EASY
.
F K The inventory turnover ratio and
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) Answe Ratio r: a analy sis EASY
1
.
F K Ratio analysis involves analyzing financial statements in order to appraise a firm's financial position and strength. a. b. True False (3.2) Answe Liqui r: a dity ratio s EASY
2
.
F K The current ratio and inventory turnover ratios both help
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 3: Financial Analysis
True/False
Page 1
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. b. True False (3.2) Answe Liqui r: a dity ratio s EASY
3
.
F K 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. True Fals e
a. b.
(3.2) Answe Curre r: b nt ratio
EASY
4
. a. b.
F K High current and quick ratios always indicate that a firm is managing its liquidity position well. True False
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Page 2
True/False
Chapter 3: Financial Analysis
(3.3) Answe Asset r: a manag ement ratio s
5
EASY
.
F K The inventory turnover ratio and