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D076 PRE-ASSESSMENT TEST. LATEST
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D076 Pre-AssessmentStudy online at https://quizlet.com/_9ivpfr
D076 PRE-ASSESSMENT TEST. LATEST 2024-2025
1. Which 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?: Flexibility
2. Comparing a firm's ratios across time.: Trend Analysis
3. Comparing a firm's financial ratios to other firms' ratios or industry averages.:
Cross-sectional Analysis
4. 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?: Trend
analysis
5. 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?: Quick ratio
6. Why are ratios considered flexible?: Because they are not regulated and can be
changed or invented according to a firm's needs
7. Which statement below is an example of how ratios are used in the field of
finance?: A firm's ratios are compared with those of a benchmark peer group to
determine the firm's relative strength and performance.
8. How might calculating financial ratios help shareholders?: Ratios can be used to
determine whether a firm is maximizing shareholder wealth.
9. 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?:
Benchmarking
10. measure a firm's ability to meet short-term obligations without raising external
capital.: Liquidity ratios
11. (also called efficiency ratios) measure how well the company uses its assets to
generate sales or cash—the firm's operational efficiency and profitability.:
Activity ratios
12. consider how the firm is financed.: Leverage ratios
13. Which action will increase the return on equity of a firm?: Increasing the asset
usage efficiency of the firm
14. Which type of ratio should be used to examine the cost efficiency of a firm's
production?: Profitability
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