Fina 470 Final Discussion Q's Post-Ch.7 (3) Practice Questions and Answers
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Course
2024/2025
Institution
2024/2025
Fina 470 Final Discussion Q's Post-Ch.7
(3) Practice Questions and Answers
How is return on invested capital used as an internal management tool? - Ans:-these returns are
made up of the results achieved by individual product lines and projects, and well managed companies
exercise rigorous contr...
money from the suppliers of debt capital. If the investment base is defined as Net operating assets, than
Net Operating Profit After Tax (NOPAT) is used
Why is liquidity important in analysis of financial statements? Explain its importance from the view of
more than one type of user - Ans:✔✔-liquidity is an indicator of an entity's ability to meet its current
obligations. an entity in a weak short-term liquidity position will have difficulty in meeting short-term
obligations. Viewpoints:
1. Equity Investor - in this case, the company is likely unable to avail itself of favorable discounts and to
take advantage of profitable business opportunities, and could even mean loss of control an eventual
partial/total loss of capital investment
2. Creditors - in this case, delay in collection of interest and principle due would be expected and there is
a possibility of the partial or total loss of the amounts due to them
What is window-dressing of current assets and liabilities? How can we recognize whether financial
statements are window-dressed? - Ans:✔✔-"window-dressing" refers the the adjustment of year-end
account balances of current assets and liabilities to show a more favorable current ration than is
otherwise warranted.
The analyst should go beyond year-end reported amounts and try to obtain as many interim readings of
the current ratio as possible.
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