Multiple Choice Finance Problems
Not what you're looking for?
1) Which of the following alternatives could potentially result in a net increase in a company's free cash flow for the current year?
a. Reducing the days-sales-outstanding ratio.
b. Increasing the number of years over which fixed assets are depreciated.
c. Decreasing the accounts payable balance.
d. All of the answers above are correct.
E. Answers a and b are correct
2) Which of the following statements is most correct?
a. Many large firms operate different divisions in different industries, and this makes it hard to develop a meaningful set of industry benchmarks for these types of firms.
b. Financial ratios should be interpreted with caution because there exist seasonal and accounting differences that can reduce their comparability.
c. Financial ratios should be interpreted with caution because it may be difficult to say with certainty what is a "good" value. For example, in the case of the current ratio, a "good" value is neither high nor low.
d. Ratio analysis facilitates comparisons by standardizing numbers.
e. All of the statements above are correct.
3) As a short-term creditor concerned with a company's ability to meet its financial obligation to you, which one of the following combinations of ratios would you most likely prefer?
Current Debt
ratio TIE ratio
a. 0.5 0.5 0.33
b. 1.0 1.0 0.50
c. 1.5 1.5 0.50
d. 2.0 1.0 0.67
e. 2.5 0.5 0.71
Please see attached for full question.
Purchase this Solution
Solution Summary
Answers to 3 Multiple Choice Finance Problems
Solution Preview
Which of the following alternatives could potentially result in a net increase in a company's free cash flow for the current year?
a. Reducing the days-sales-outstanding ratio.
b. Increasing the number of years over which fixed assets are depreciated.
c. Decreasing the accounts payable balance.
d. All of the answers above are correct.
E. Answers a and b are correct
Answer: a. Reducing the days-sales-outstanding ratio.
Reducing the days-sales-outstanding ratio means collecting the receivables faster. This increases the cash flow.
Depreciation is a non cash expense. It does not involve an outflow of cash. However Depreciation provides tax shield which results in ...
Purchase this Solution
Free BrainMass Quizzes
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
Basics of corporate finance
These questions will test you on your knowledge of finance.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)