Test Bank For Analysis for Financial Management 12Th Edition BY Robert Higgins

Test Bank For Analysis for Financial Management 12Th Edition BY Robert Higgins

Chapter 02 Test Bank

1. An inventory turnover ratio of 10 means that, on average, items are held in inventory for 10 days.

FALSE

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Difficulty: 1 Easy

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2. All else equal, an increase in a company’s asset turnover will decrease its ROE.

FALSE

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Difficulty: 1 Easy

Gradable: automatic

3. A company’s return on assets will always equal or exceed its profit margin.

FALSE

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Difficulty: 2 Medium

Gradable: automatic

4. A company’s price-to-earnings ratio is always equal to one minus its earnings yield.

FALSE

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Difficulty: 1 Easy

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5. Return on assets can be calculated as profit margin times asset turnover.

TRUE

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6. All else equal, a firm would prefer to have a higher gross margin.

TRUE

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7. The times-interest-earned ratio always equals or exceeds the times-burden-covered ratio.

TRUE

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8. If a firm increases its accounts payable period, other things equal, it increases the cash conversion cycle.

FALSE

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9. Across companies, ROA and financial leverage tend to be inversely related.

TRUE

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Difficulty: 2 Medium

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10. One advantage of ROE is that it is a risk-adjusted measure of performance.

FALSE

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Difficulty: 1 Easy

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