1. A company builds a new plant and finances its construction by issuing stock.

Which ratio is least

likely to be affected, all else being equal?

Current ratio

Debt to equity ratio

Debt to asset ratio

Net fixed assets to total assets

2.

The sustainable growth rate is the maximum growth rate achievable over an extended period of time.

True

False

3.

GoodTimes, Inc. has asset turnover of 0.5 times, a net profit margin of 10% and average total assets of
$100, what is its net income (assuming no unusual items)?

$50

$500

$5

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 

The answer cannot be determined with the information provided.

4.

The cash cycle measures the days required to produce finished goods or delivered services.

True

False

5. An increase in financial leverage generally results in a higher return on equity (ROE).

True

False

6. Biases can and should always be eliminated in financial forecasts.

True

False

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 7. The higher the opportunity cost of capital the higher the NPV.

True

False

8. Which of the following ratios appears on a common-size balance sheet?

I. Debt to asset ratio

II. Net working capital to total assets
III. Net profit margin

 I , II, III

 I only

 I and III

 III only

9. The cash conversion cycle is calculated as:

 Days in Inventory + Collection Period

 Days in Inventory - Payables Period

 Days in Inventory + Collection Period - Payables Period

 None of the above

10. An optimal current ratio should be greater than 1.0.

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  True

 False

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