Answer true / false:

a) A high "inventory turnover ratio" may be as much trouble for a company as a low

inventory turnover situation.

b) A rising "accounts receivable DSO" is always a sign of worsening credit control.

c) If the "sales to working capital ratio" is higher than the industry average, the company is

in a favourable position.

d) The higher the investment by the owners the better for creditors; even if it is an

inefficient investment.

e) The higher the current ratio the better - usually. However, if it remains too high it may

indicate a problem in cash management.

f) A company with a current ratio of less than 1:1 is likely to become insolvent.

g) In order to calculate the acid-test ratio the analyst must remove accounts receivable

from the current assets.

h) Goodwill is removed from the calculation of "net worth" and "equity" in financial

statement analysis.

i) Dividends are an expense, the same as advertising or cost of goods, and must be

monitored by the credit analyst.

j) Industry averages do not reflect expectations for a company and are merely guides for a

credit analyst.

k) If sales stay consistent, and there is no new investment in fixed assets, the "sales to fixed

asset" ratio will generally improve each year due to amortization / depreciation.

l) A high return on investment is an indicator of excellent credit worthiness.

m) Long-term financing is generally linked to long-term assets.

n) A low fixed asset to net worth ratio could be positive or negative depending on the

requirements of the industry.