Ratios Essay

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Examples of Questions on Ratio Analysis A: Multiple Choice Questions 1. Which of the following is considered a profitability measure? a. Days sales in inventory b. Fixed asset turnover c. Price-earnings ratio d. Cash coverage ratio e. Return on Assets 2. Firm A has a Return on Equity (ROE) equal to 24%, while firm B has an ROE of 15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8. Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover ratio equal to 0.4. From this we know that a. Firm A has a higher profit margin than firm B b. Firm B has a higher profit margin than firm A c. Firm A and B have the same profit margin d. Firm A has a higher equity multiplier than firm B e. You need more information to say anything about the firm's profit margin 3. If a firm has $100 in inventories, a current ratio equal to 1.2, and a quick ratio equal to 1.1, what is the firm's Net Working Capital? a. $0 b. $100 c. $200 d. $1,000 e. $1,200 4. To measure a firm's solvency as completely as possible, we need to consider a. The firm's relative proportion of debt and equity in its capital structure b. The firm's capital structure and the liquidity of its current assets c. The firm's ability to use Net Working Capital to pay off its current liabilities d. The firms leverage and its ability to make interest payments on its long-term debt e. The firm leverage and its ability to turn its assets over into sales B: Problem Solving Questions You have been hired as an analyst for Mellon Bank and your team is working on an independent assessment of Daffy Duck Food Inc. (DDF Inc.) DDF Inc. is a firm that specializes in the production of freshly imported farm products from France. Your assistant has provided you with the following data for Flipper Inc and their industry. |

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