FINA 470 Exam Questions and Answrs
which of the following best describes the current ratio? - Ans:-liquidity ratio (ability of current assets
to cover current debt)
which of the following is not likely to be used to measure a company's liquidity? - Ans:-financial
leverage (leverage refers to lo...
accounts payable days outstanding at the end of year 2 is closest to - Ans:✔✔-72.0 days (account
payables divided by the cogs per day) (can find the cogs sold because it is the other part of the gross
profit margin times the reported sales)
days in inventory at the end of year 2 is closest to - Ans:✔✔-60.0 days (AR divided by the dcogs/day)
which of the following will not affect the calculation of leverage ratio? - Ans:✔✔-covenants (existence of
significant debt)
debt covenants themselves do not change the leverage ratios as they do not affect the amount of debt.
an analyst would want to capitalize significant operating leases per A when calculation ratios, and id
assets are significantly undervalued the analyst may want to add to both the asset value and the equity
which would affect the ratios
if a firm capitalizes a lease instead of treating the lease as an operating lease, the effect on the current
ratio and the debt-to equity ratio will be - Ans:✔✔-current ratio: decreased (current liabilities increase
due to the current portion of lease liability being added to current liabilities with the current portion
being added)
debt to equity ratio: increased (lease liability is added to the debt)
if a company's current ratio increases from 1.1 to 1.3 from one year to the next, it can be concluded that:
- Ans:✔✔-liquidity has increased
the current assets have NOT increased because the liabilities could have gone down
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