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Chapter 10 Questionaire
Chapter 10 Questionaire
Tagbilaran City
FM 6
Chapter 10 Quiz
Analysis of Financial Statement
I. Identify the correct terms referred by each statement. Write your answer on the space
provided.
1. _________________ normalize balance sheet and income statement items to allow easier
comparison of different sized firms.
2. _________________ a very useful measure of overall internal liquidity which combines
information from the receivables turnover and the accounts payable.
3. _________________ examines the uncertainty of income flows for the total firm and for the
individual sources of capital.
4. _________________ is the prime determinant of operating earnings variability.
5. _________________ indicate what proportion of the firm’s capital is derived from debt
compared to other sources of capital, such as preferred stock, common stock and retained
earnings.
6. _________________ involves an estimate of the present value of a firms future required lease
payments.
7. _________________ are intended to provide information on the resources available to
management how these resources were financed and what firm accomplished with them.
8. _________________ modifies cash flow from operations to recognize that some investing and
financing activities are critical to the firm.
9. _________________ are intended to indicate the ability of the firm to meet future short-term
financial obligations.
10. _________________ is the uncertainty of operating income caused by the firms industry.
II. Multiple Choice: Encircle the letter that corresponds to your answer.
1. It shows what resources the firm controls and how it has financed these assets.
a. Income statement c. balance sheet
b. Statement of cash flow d. financial ratio
2. Contains information on the operating performance of the firm during some period of time.
a. Income Statement c. Balance Sheet
b. Statement of Cash Flow d. Financial Ratio
3. Integrates the effects on the firms cash flow of income flows and changes on the balance sheet.
a. Income Statement c. Balance Sheet
b. Statement of Cash Flow d. Financial Ratio
4. In which a firm examine a firm’s relative performance overtime to determine whether it is
progressing or declining and helpful when estimating future performance.
a. Risk Analysis c. Growth Analysis
b. Time Series Analysis d. Liquidity Analysis
5. It is the additional uncertainty of returns to equity holders due to a firm’s use of fixed financial
obligation securities.
a. Business Risk c. External Liquidity Risk
b. Internal Risk d. Financial Risk
6. It is the uncertainty of operating income caused by the firms industry.
a. Business Risk c. External Liquidity Risk
b. Internal Risk d. Financial Risk
7. It examines the relationship between current assets and current liabilities.
a. Liquidity Ratio c. Current Ratio
b. Quick Ratio d. Cash Ratio
8. It relates current liabilities to only relatively liquid current assets which referred to as:
a. Liquidity Ratio c. Current Ratio
b. Quick Ratio d. Cash Ratio
9. It is the most conservative liquidity ratio which relates the firm’s cash and short-term
marketable securities to its current liabilities.
a. Liquidity Ratio c. Current Ratio
b. Quick Ratio d. Cash Ratio
10. A very useful measure of overall internal liquidity which combines information from the
receivables turnover, the inventory turnover and the accounts payable turnover.
a. Receivables Turnover c. Cash Conversion Cycle
b. Operating Profit Margin d. Return on Owner’s Equity
I. IDENTIFICATION
1. Common Size Statements
2. Cash Conversion Cycle
3. Risk Analysis
4. Sales Variability
5. The proportion of debt ratios
6. Capitalizing Operating Leases
7. Financial Statements
8. Free Cash Flow
9. Internal Liquidity Ratios
10. Business Risk