Devry FIN 382 Week 3 Quiz

Question 1 (TCO 5) Which of the following best indicates that a firm carries excess inventory?

• A decline in sales
• A decline in the current ratio
• A decline in days’ sales in inventory
• A stable current ratio with declining quick ratios
• A rise in total asset turnover

Question 2 (TCO 5) A high working capital turnover ratio indicates

• that the firm is overcapitalized.
• an unprofitable use of working capital.
• that the firm is undercapitalized.
• None of the above

Question 3 (TCO 5) Investments classified as marketable securities should be

• temporary.
• long-term.
• permanent.
• None of the above

Question 4 (TCO 6) A low sales to working capital ratio tentatively indicates a(n)

• profitable use of working capital.
• unprofitable use of working capital.
• equal use of working capital.
• All of the above

Question 5 (TCO 6) When dong external analysis, many of the reasons why the day’s sales in receivables is abnormally high or low cannot be determined without access to

• external information.
• financial information.
• internal information.
• receivable information.

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Question 6. (TCO 5) Working capital of a business is

• the excess of current liabilities over current assets.
• the excess of assets over liabilities.
• the excess of current assets over current liabilities.
• the excess of liabilities over assets.

Question 7. (TCO 5) A comparison of current assets with current liabilities gives an indication of

• long-term debt paying ability.
• overall debt paying ability.
• short-term debt paying ability.
• no debt paying ability.

Question 8.(TCO 5) Investments classified as marketable securities should be

• temporary.
• long-term.
• permanent.
• None of the above

Question 9.(TCO 6) If a firm has pledged its receivables and its inventory, then the best indicator of its short-term liquidity may be indicated by

Student Answer:

• working capital.
• an acid-test.
• cash ratio.
• day’s sales in receivables.

Question 10.(TCO 6) By reporting marketable equity securities under current assets, management picks up a(n)

Student Answer:

• asset advantage.
• debt advantage.
• liquidity advantage.
• investment advantage.