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Expanded Chapter 3 Quiz Clean

The document is a financial management quiz covering key concepts such as current ratio, quick ratio, cash ratio, net profit margin, return on assets, and return on equity. It includes true or false questions, multiple choice questions, and identification questions to assess understanding of financial ratios and their implications. The answers are provided for each question to facilitate learning.

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mary tejada
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24 views2 pages

Expanded Chapter 3 Quiz Clean

The document is a financial management quiz covering key concepts such as current ratio, quick ratio, cash ratio, net profit margin, return on assets, and return on equity. It includes true or false questions, multiple choice questions, and identification questions to assess understanding of financial ratios and their implications. The answers are provided for each question to facilitate learning.

Uploaded by

mary tejada
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Expanded Chapter 3 - Financial Management Quiz

I. True or False

1. The current ratio compares current assets to current liabilities. (Answer: True)

2. Quick ratio includes inventory in the calculation. (Answer: False)

3. Cash ratio measures only cash and near-cash assets against short-term debt. (Answer: True)

4. Net profit margin is calculated as net income divided by total assets. (Answer: False)

5. Return on Assets measures how well assets are used to generate profit. (Answer: True)

6. Return on Equity tells how much income the company earns from shareholders' investment. (Answer:

True)

7. The quick ratio is always higher than the current ratio. (Answer: False)

8. A low cash ratio could mean liquidity problems. (Answer: True)

II. Multiple Choice

1. Which of the following is the correct formula for the Current Ratio?

A. Current Liabilities Current Assets

B. Total Assets Current Liabilities

C. Current Assets Current Liabilities

D. Current Assets Total Liabilities

Answer: Current Assets Current Liabilities

2. Which items are excluded in the Quick Ratio calculation?

A. Accounts Receivable and Inventory

B. Inventory and Prepaid Expenses

C. Marketable Securities and Inventory

D. Cash and Accounts Receivable

Answer: Inventory and Prepaid Expenses

3. What does a high Cash Ratio indicate?

A. Strong cash position to pay debts immediately

B. Overuse of credit

C. High inventory turnover

D. Low equity balance

Answer: Strong cash position to pay debts immediately


Expanded Chapter 3 - Financial Management Quiz

4. How is Net Profit Margin computed?

A. Net Income Sales

B. Sales Net Income

C. Net Income Total Assets

D. Net Income Equity

Answer: Net Income Sales

5. Which formula reflects the Return on Equity (ROE)?

A. Net Income Total Assets

B. Sales Total Liabilities

C. Net Income Equity

D. Equity Net Income

Answer: Net Income Equity

III. Identification

1. This ratio compares assets that are quickly converted to cash against current liabilities.

Answer: Quick Ratio

2. Tells how much actual cash and near-cash is available to pay short-term obligations.

Answer: Cash Ratio

3. Measures overall profitability as a percentage of total sales.

Answer: Net Profit Margin

4. Used to evaluate how efficiently a firm utilizes its assets to produce net income.

Answer: Return on Assets

5. Shows the portion of income earned on shareholders equity.

Answer: Return on Equity

6. A liquidity ratio that includes inventory in the asset calculation.

Answer: Current Ratio

7. Strictest test of liquidity, excluding inventory and prepaid items.

Answer: Quick Ratio

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