Measuring Corporate Performance

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Question 1

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The income statement of a firm shows the value of its assets and liabilities over a specified period of time.

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Question 2

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The higher the times interest earned ratio,the higher the interest expense.

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Question 3

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The net working capital of a firm will decrease when unpaid bills from suppliers are later paid with cash.

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Question 4

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Net working capital is determined from the difference between current assets and current liabilities.

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Question 5

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Net working capital to total assets and current ratio are both liquidity ratios.

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Question 6

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The net working capital to total assets ratio is always a larger number than the current ratio.

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Question 7

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The asset turnover ratio and inventory turnover ratio are both efficiency ratios.

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Question 8

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The inventory turnover ratio times the average days in inventory equals 365.

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Question 9

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Return on assets and return on equity are both profitability ratios.

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Question 10

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Return on assets is always a larger number than the return on equity.

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Question 11

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The reduction in value over time of intangible assets is known as amortization.

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Question 12

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Receivable turnover ratio and asset turnover ratio are both efficiency ratios.

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Question 13

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Market value added is the difference between the market value of the firm's equity and its book value.

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Question 14

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Market value added is the same as economic value added.

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Question 15

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The difference between the current and quick ratios is that inventory has been subtracted from current assets.

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Question 16

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A healthy current ratio and an unhealthy quick ratio may be caused by excess inventory.

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Question 17

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Other things equal,an increase in average accounts receivable will increase a firm's return on assets.

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Question 18

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Residual income is another term for economic value added.

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Question 19

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EVA is the net profit of the firm adjusted for the cost of capital.

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Question 20

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ROE is equal to ROC when the firm has no debt.

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