Which ratio or ratios measure the overall efficiency of the firm in managing its investment?

of the firm in managing its investment in assets and in generating return to shareholders? 
a) Gross profit margin and net profit margin.
b) Return on investment.
c) Total asset turnover and operating profit margin.
d) Return on investment and return on equity.
2] How would the sale of a building be classified?

a) Operating outflow.
b) Operating inflow.
c) Investing inflow.
d) Financing inflow
3] How would revenue from sales of goods and services be classified?
a) Operating outflow.
b) Operating inflow.
c) Investing inflow.
d) Financing inflow.
4] Which of the following could lead to cash flow problems?
a) Obsolete inventory, accounts receivable of inferior quality, easing of credit by suppliers.
b) Slow-moving inventory, accounts receivable of inferior quality, tightening of credit by suppliers.
c) Obsolete inventory, increasing notes payable, easing of credit by suppliers.
d) Obsolete inventory, improved quality of accounts receivable, easing of credit by suppliers.
5] Which of the following is not required to be discussed in Management's Discussion and Analysis of the Financial Condition and Results of Operations?
a) Liquidity.
b) Capital resources.
c) Operations.
d) Earnings projections.




6] An outflow of cash would result from which of the following?
 a) The decrease in an asset account other than cash.
 b) The increase in a liability account.
 c) The decrease in a liability account.
 d) The increase in an equity account.
7] Which method of calculating cash flow from operations requires the adjustment of net income for deferrals, accruals, non-cash, and non-operating expenses?
a) The direct method.
b) The indirect method.
c) The inflow method.
d) The outflow method.
8] What are external sources of cash?
 a) Cash inflows from operating activities.
 b) Cash inflows from investing activities.
 c) Cash inflows from financing activities.
 d) Both (b) and (c).
9] Which of the following current assets is included in the adjustment of net income to obtain cash flow from operating activities?
a) Accounts receivable.
b) Inventory.
c) Prepaid expenses.
d) All of the above.
10] The statement of cash flows segregates cash inflows and outflows by: 
a) Operating and financing activities.
b) Financing, and investing activities.
c) Operating and investing activities.
d) Operating, financing, and investing activities.
11] What do the asset turnover ratios measure?
 a) The liquidity of the firm's current assets.
 b) Management's effectiveness in generating sales from investments in assets.
 c) The overall efficiency and profitability of the firm.
 d) The distribution of assets in which funds are invested.
12] What is a limitation common to both the current and quick ratio?
 a) Accounts receivable may not be truly liquid.
 b) Inventories may not be truly liquid.
 c) Marketable securities are not liquid.
 d) Prepaid expenses are potential sources of cash.
13] Why is the quick ratio a more rigorous test of short-term solvency than the current ratio?
 a) The quick ratio considers only cash and marketable securities as current assets.
 b) The quick ratio eliminates prepaid expenses for the numerator.
 c) The quick ratio eliminates prepaid expenses for the denominator.
 d) The quick ratio eliminates inventories from the numerator.
14] . Which of the following items is included in the adjustment of net income to obtain cash flow from operating activities?
a) Depreciation expense for the period.
b) The change in deferred taxes.
c) The amount by which equity income recognized exceeds cash received.
d) All of the above.
15] What is an investor's objective in financial statement analysis?
 a) To determine if the firm is risky.
 b) To determine the stability of earnings.
 c) To determine changes necessary to improve future performance.
 d) To determine whether or not an investment is warranted by estimating a company's future earnings stream.
16] How would payments for taxes be classified?
a) Operating outflow.
b) Operating inflow.
c) Investing outflow.
d) Financing outflow.
17] How would short-term investments in marketable securities be classified?
 a) Cash.
 b) Operating activities.
 c) Financing activities.
 d) Investing activities.
18] What information can be gained from sources such as Industry Norms and Key Business Ratios, Annual Statement Studies, Analyst's Handbook, and Industry Surveys?
a) The general economic condition.
b) Forecasts of earnings.
c) Elaboration's of financial statement disclosures.
d) A company's relative position within its industry.






19] What type of accounts are accounts receivable and inventory?
 a) Cash accounts.
 b) Operating accounts.
 c) Financing accounts.
 d) Investing accounts.
20] The change in retained earnings is affected by which of the following?
 a) Net income and common stock.
 b) Net income and paid-in capital.
 c) Net income and payment of dividends.
 d) Payment of dividends and common stock.
21] What is the most widely used liquidity ratio?
 a) Quick ratio.
 b) Current ratio.
 c) Inventory turnover.
 d) Debt ratio.
22] What type of accounts are notes payable and current maturities of long-term debt?
 a) Cash accounts.
 b) Operating accounts.
 c) Financing accounts.
 d) Investing accounts.
23] What is Form 10-K?
a) A document filed with the AICPA, containing supplementary schedules showing management
   remuneration and elaborations of financial statement disclosures.
b) A document filed with the Securities and Exchange Commission by companies selling securities to the
   public, containing much of the same information as the annual report as well as additional detail.
c) A document filed with the Securities and Exchange Commission containing key business ratios and
   forecasts of earnings.
d) A document filed with the Securities and Exchange Commission containing nonpublic information.
24] What are common size financial statements?
 a) Statements that express each account on the balance sheet as a percentage of total assets and each
    account on the income statement as a percentage of net sales.
 b) Statements that standardize financial data in terms of trends.
 c) Statements that relate the firm to the industry in which it operates.
 d) Statements based on common sense and judgment.






25] How would the repayment of debt principal be classified?
 a) Operating outflow.
 b) Operating inflow.
 c) Investing outflow.
 d) Financing outflow.
26] Which profit margin measures the overall operating efficiency of the firm?
 a) Gross profit margin.
 b) Operating profit margin.
 c) Net profit margin.
 d) Return on equity.
27] Which profit margin measures the overall operating efficiency of the firm?
 a) Gross profit margin.
 b) Operating profit margin.
 c) Net profit margin.
 d) Return on equity.
28] What does an increasing collection period for accounts receivable suggest about a firm's credit policy?
a) The credit policy is too restrictive.
b) The firm is probably losing qualified customers.
c) The credit policy may be too lenient.
d) The collection period has no relationship to a firm's credit policy.
29] How is it possible for a firm to be profitable and still go bankrupt?
a) Earnings have increased more rapidly than sales.
b) The firm has positive net income but has failed to generate cash from operations.
c) Net income has been adjusted for inflation.
d) Sales have not improved even though credit policies have been eased.
30] What is the first step in an analysis of financial statements?
 a) Check the auditor's report.
 b) Check references containing financial information.
 c) Specify the objectives of the analysis.
 d) make a common size analysis.
















Part II : Please Indicate the following as operating activities (O) financing activities (F) or investing activities (I).


(a) Purchase of land                                                        __ _
 
 (b) Accounting payable                                                  __ __

 (c) Repayment of debt principal                                  __ __

 (d) Purchase of treasury stock                                      __ __

 (e) Inventory                                                                    __ __

 (f) Increase in short-term debt                                    __ __

 (g) Reduction of long-term debt                                  __ __

 (h) Gain on sale of land                                                 __ _

 (i) Gain on loss / gain                                                     __ __

 (j) Purchase of common stock of another firm         __ __

 (k) Resale of treasury stock                                          __ __

 (l) Payment of cash dividends                                      __ __

(m) Account Receivable                                                 ____

 (n) Purchase of equipment                                           __ __

 (o) Issuance of common stock                                     __ __

 (p) Sale of building                                                          __ __

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Which ratio or ratios measure the overall efficiency of the firm in a managing its investment in assets and in generating returns to shareholders?

Which ratios measures the overall efficiency of the firm?

Which ratio can be used to measure the firms efficiency in managing its assets?

What ratios measure asset efficiency?