(1) A high inventory turnover may indicate

a) an efficient use of the investment in inventory.

b) a high risk of stock-outs.
c) a low profit margin.
d) Both selections (a) and (b) are correct.

(2) Inventory is removed from liquid assets in the calculation of the quick ratio because
a) inventory is meaningless.
b) it is usually the least liquid of the current assets.
c) because it is a large part of current assets.
d) because it cannot be sold for cash.

(3) Total asset turnover is

a) the ratio of credit sales to total assets.
b) the ratio of sales to total assets.
c) the ratio of the cost of goods sold to total assets.
d) high.

(4) The net profit margin

a) is less than or equal to the operating profit margin.
b) is less than or equal to the gross profit margin.
c) is greater than the operating profit margin.
d) Both selections (a) and (b) are correct sentence competions.

(5) The debt-to-equity ratio is a measure of a firm's

a) financial leverage
b) operating leverage
c) liquidity
d) profitability

(6) The CBA Company has a net profit margin of 5% and a total asset turnover of 5 times. What
is CBA's return on assets?
a) 1%
b) 5%
c) 10%
d) 25%
(7) A company with a debt-to-equity ratio of 2.5 and $10 million of assets has debt of
a) $2.9 million
b) $5 million
c) $7.14 million
d) $8.23 million

for items 9-10

At December 31 a company's records show the following information:

8. The company's working capital is

a. $60,000

b. $66,000

c. $196,000

d. $100,000

9. The company's current ratio is

a. 1.0 : 1

b. 2.0 : 1

c. 2.1 : 1

d. 1.5 : 1
10. The company's quick ratio is
a. 0.7 : 1

b. 1.0 : 1

c. 2.0 : 1

d. 1.5 : 1