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D076 Pre-Assessment 2024/2025 already graded A+
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D076 Pre-Assessment 2024/2025 already graded A+
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D076 Pre-AssessmentWhich principle of ratio analysis means that ratios are open for analyst interpretation, are not
governed by rules, and allow creativity to work according to a particular company or asset? -
ANSFlexibility
Comparing a firm's ratios across time. - ANSTrend Analysis
Comparing a firm's financial ratios to other firms' ratios or industry averages. -
ANSCross-sectional Analysis
As an active investor, Maria is analyzing her portfolio to decide if there are any stocks she
should remove from her pool of financial securities. A company she has invested in, Quiet Flag
Industries, just released its annual report.
Which kind of method should Maria use to see if the company has improved? - ANSTrend
analysis
An investment analyst is concerned about a construction company's ability to sell its inventory to
meet current obligations, because much of the inventory (commercial buildings) it builds and
sells takes longer than a year to construct.
Which ratio should this analyst use to consider the effect of the firm's inventory on the firm's
ability to meet current obligations? - ANSQuick ratio
Why are ratios considered flexible? - ANSBecause they are not regulated and can be changed
or invented according to a firm's needs
Which statement below is an example of how ratios are used in the field of finance? - ANSA
firm's ratios are compared with those of a benchmark peer group to determine the firm's relative
strength and performance.
How might calculating financial ratios help shareholders? - ANSRatios can be used to determine
whether a firm is maximizing shareholder wealth.
The firm Betsy's Books conducts a financial analysis using ratios to know how it is performing in
comparison to other similar firms. What is this process called? - ANSBenchmarking
measure a firm's ability to meet short-term obligations without raising external capital. -
ANSLiquidity ratios
(also called efficiency ratios) measure how well the company uses its assets to generate sales
or cash—the firm's operational efficiency and profitability. - ANSActivity ratios
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