M Finance 3rd Edition By Cornett – Test Bank

1.

Which of the following refer to ratios that measure the relationship between a firm’s liquid (or current) assets and its current liabilities? 
 

A.  Cross-section

B.  Internal growth

C.  Liquidity

D.  Market value

2.

Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities? 
 

A.  Cross-section

B.  Current

C.  Internal-growth

D.  Quick or acid test

3.

Which type of ratio measures a firm’s ability to pay off short-term obligations without relying on inventory sales? 
 

A.  Cash

B.  Current

C.  Internal-growth

D.  Quick or acid test

4.

Which ratio measures a firm’s ability to pay short-term obligations with its available cash and market securities? 
 

A.  Cash

B.  Current

C.  Internal-growth

D.  Quick or acid test

5.

Which statement is true? 
 

A.  The less liquid assets a firm holds, the less likely it is that the firm will experience financial distress.

B.  The lower the liquidity ratios, the less liquidity risk a firm has.

C.  Liquid assets generate profits for the firm.

D.  Extremely high levels of liquidity guard against liquidity crises, but at the cost of lower returns on assets.

6.

Which of the following ratios measure how efficiently a firm uses its assets, as well as how efficiently the firm manages its accounts payable? 
 

A.  Asset management

B.  Cash

C.  Internal-growth

D.  Quick or acid test

7.

Which ratio measures the number of dollars of sales produced per dollar of inventory? 
 

A.  Asset management

B.  Cash

C.  Internal-growth

D.  Inventory turnover