Question 7

Ratio analysis can be useful for

		A. historical trend analysis within a firm.
		B. comparison of ratios within a single industry.
		C. measuring the effects of financing.
		D. All of these are true.

Question 8

Depreciation tends to

		A. increase cash flow and decrease income.
		B. decrease cash flow and increase income.
		C. affect only cash flow.
		D. affect only income

Question 10

A corporation can increase their earnings per share by

		A. increasing tax-deductible expenses
		B. increasing Treasury stock
		C. decreasing depreciation
		D. decreasing retained earnings

Question 11

If sales volume exceeds the break-even point, the firm will experience

		A. an operating loss.
		B. an operating profit.
		C. an increase in plant and equipment.
		D. an increase in stock price.

Question 12

All of the following are common examples of possible distortion in reported income except

		A. inflation
		B. treatment of nonrecurring items
		C. cash flow statements
		D. reporting of revenue

Question 13

If Baxter Unlimited has annual sales of $5,000,000 (80% on credit), and receivables equal to 35% of credit sales, what is their receivables turnover?

		A. 3.6 times
		B. 2.9 times
		C. 2.3 times
		D. 4.2 times

Question 15

An aggressive, risk-oriented firm will likely

		A. borrow long-term and carry low levels of liquidity.
		B. borrow short-term and carry low levels of liquidity.
		C. borrow long-term and carry high levels of liquidity.
		D. borrow short-term and carry high levels of liquidity.

Question 16

When the yield curve is downward sloping, generally a financial manager should

		A. expect an economic boom
		B. utilize long-term financing
		C. ncrease investment and level of financing overall
		D. utilize short-term financing

Question 17

Risk exposure due to heavy short-term borrowing can be compensated for by

		A. carrying highly liquid assets.
		B. carrying illiquid assets.
		C. carrying longer term, more profitable current assets.
		D. carrying more receivables to increase cash flow.

Question 18

A "normal" term structure of interest rates would depict

		A. short-term rates higher than long-term rates.
		B. long-term rates higher than short-term rates.
		C. no general relationship between short- and long-term rates.
		D. Intermediate rates (1-5 years) lower than both short-term and long-term rates.