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
Gradable: automatic
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
Gradable: automatic
5. Return on assets can be calculated as profit margin times asset turnover.
TRUE
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Difficulty: 1 Easy
Gradable: automatic
6. All else equal, a firm would prefer to have a higher gross margin.
TRUE
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Difficulty: 1 Easy
Gradable: automatic
7. The times-interest-earned ratio always equals or exceeds the times-burden-covered ratio.
TRUE
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Difficulty: 1 Easy
Gradable: automatic
8. If a firm increases its accounts payable period, other things equal, it increases the cash conversion cycle.
FALSE
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Difficulty: 1 Easy
Gradable: automatic
9. Across companies, ROA and financial leverage tend to be inversely related.
TRUE
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Difficulty: 2 Medium
Gradable: automatic
10. One advantage of ROE is that it is a risk-adjusted measure of performance.
FALSE
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Difficulty: 1 Easy
Gradable: automatic
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