The debt-to-equity ratio measures which of the following? a. Liquidity. b. Solvency. c. Profitability. d. Market strength. | Homework.Study.com (2024)

Get access to this video and our entire Q&A library

• The debt-to-equity ratio best relates to which building block of financial statement analysis? a. Liquidity/Efficiency b. Market Prospects c. Profitability d. Solvency
• The equity ratio best relates to which building block of financial statement analysis? a. Liquidity/Efficiency b. Market Prospects c. Profitability d. Solvency
• Which of the following is not a liquidity ratio? Select one: a. Current ratio b. Quick ratio c. Debt-to-equity ratio d. Interest coverage ratio
• Working capital is a measure of a. consistency. b. liquidity. c. profitability. d. solvency.
• The gross margin ratio best relates to which building block of financial statement analysis? a. Liquidity/Efficiency b. Market Prospects c. Profitability d. Solvency
• The book value per common share ratio best relates to which building block of financial statement analysis? a. Liquidity/Efficiency b. Market Prospects c. Profitability d. Solvency
• The building blocks of financial statement analysis include: A. Liquidity and efficiency. B. Solvency. C. Profitability. D. Market prospects. E. All of these.
• The acid-test ratio best relates to which building block of financial statement analysis? a. Liquidity/Efficiency b. Market Prospects c. Profitability d. Solvency
• The times interest earned ratio best relates to which building block of financial statement analysis? a. Liquidity/Efficiency b. Market Prospects c. Profitability d. Solvency
• Which of the following types of measures focuses primarily on income statement information? A. long-term solvency measures. B. short-term liquidity measures. C. market valuation measures. D. profitability measures. E. None of the answer choices is co
• Working capital is a measure of - consistency. - liquidity. - profitability. - solvency. - none of the options listed
• Long-term creditors are usually most interested in evaluating a. liquidity and profitability. b. consistency and profitability. c. liquidity and solvency. d. consistency and solvency.
• Total asset turnover is a component of which of the following of the building blocks of financial analysis? Select one: O Solvency O Efficiency O Comparability O Market Prospects O Profitability
• The ability of a business to pay its debts as they come due is referred to as the factor of: a. Leverage. b. Profitability. c. Wealth. d. Solvency.
• Which of the following applies to the measurement and recognition of an asset? A) A pervasive principle in accounting is that an asset is measured at the market value of the consideration exchanged or sacrificed to acquire it and place it in operating con
• Which of the following statements is correct? a. The market value of a bond will always approach its par value as its maturity date approaches. This holds true even if the firm has filed for bankruptcy. b. On an expected yield basis, the expected capital
• As a potential investor, what do you feel would be the most useful attribute of measurement for each of the following: a) inventories held for sale b) inventories held for production c) long term debt Would your answer differ if you were a potential l
• A measure of the ability of an enterprise to survive over a long period of time is a a) liquidity ratio. b) solvency ratio. c) current ratio. d) profitability ratio.
• Which of the following is an implication of market efficiency? (There may be more than one right answer) (a) Resources are allocated among firms efficiently (i.e. put to best use). (b) No investor will do better than the market in any time period. (c) No
• The following are types of ratios described in Chapter 14 that can be used to assess the financial performance of not-for-profit organizations: A. Liquidity B. Going concern C. Capital structure D. Pr
• The ability to generate future revenues and meet long-term obligations is referred to as: a. liquidity and efficiency b. solvency c. profitability d. market prospects
• Equity and debt instruments with maturities greater than one year are called ____ market instruments. A) capital B) money C) federal D) benchmark
• What does each of the following categories of ratios attempt to measure? (a) Liquidity; (b) Long-term borrowing capacity; (c) Profitability. Name a group of users who might be interested in each category.
• Which of the following accounting research areas is based on the efficient-markets hypothesis? A) The decision-model approach B) Behavioral research C) Critical accounting D) Capital markets research
• Determine the term being defined by the following statement: The comparison of a company's financial condition and performance to a base amount. Choose from the following choices: | Market prospects | Financial statement analysis | Debt-to-equity ratio
• Which of the following is not a characteristic of the payback method for making capital budgeting decisions? a. It is easy to calculate and comprehend. b. It focuses primarily on liquidity, rather than profitability of an investment project. c. It can be
• Which of the following is not a principle of basic financial management? a. Risk/return tradeoff. b. Incremental cash flow counts. c. Efficient capital markets. d. Profit is king.
• Which of the following actions could not affect the liquidity of receivables? a. Shortening the credit terms b. Lengthening the credit terms c. Right of return privileges d. Lengthening the outstanding period e. All of the above could affect the liqu
• Which of the following is consistent with the trade-off theory of capital structure? A. The cost of capital continuously decreases as the firm's debt ratio increases B. The cost of capital remains constant as the firm's debt ratio increases C. The cost of
• Which one of the following measurement bases applies to investments not subject to equity accounting that are classified as trading securities? A) Current value B) Book value C) Effective rate of interest method D) Lower-of-cost-or-market
• Determine the term/phrase being defined or described by the following statement: An advantage of equity financing. Choose from the following: | Incorporators | Cumulative preferred stock | Registrars | Treasury stock | Better debt to equity ratio | Arti
• In computing the debt ratio, which of the following is subtracted in the denominator? a) Trademarks b) Patents c) Marketable Securities d) None of the above
• Determine the term being defined by the following statement: A company's ability to generate positive market expectations. Choose from the following choices: | Market prospects | Financial statement analysis | Debt-to-equity ratio | Comparative financi
• Short-term creditors are usually most interested in assessing: a. solvency b. liquidity c. marketability d. profitability
• Which of the following statements best describes the optimal capital structure? a. The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's earnings per share (EPS). b. The optimal capital structure is the
• Determine the term being defined by the following statement: A company's ability to provide financial rewards sufficient to attract and retain capital. Choose from the following choices: | Market prospects | Financial statement analysis | Debt-to-equity
• Evaluate which of the following options would be your best investment based solely on the yield to maturity criterion. Option #1: Purchase a $120,000 coupon bond with a 5.5% coupon rate selling for $1
• Determine the term being defined by the following statement: A company's ability to generate future revenues and meet long-term obligations. . Choose from the following choices: | Market prospects | Financial statement analysis | Debt-to-equity ratio |
• Which of the following is a capital budgeting method that ignores the time value of money? a. return on assets b. internal rate of return c. net present value d. payback
• Money Market Securities Which of the following money market securities is the most liquid? a. U.S. Treasury bills b. bank Certificates of Deposit c. corporate money market debt d. municipality money market debt
• Which of the following is a capital budgeting method, that ignores the time value of money? a. payback b. internal rate of return c. return on assets d. net present value
• Which is not a GAAP for investment securities? A. Equity Method B. Consolidation C. Market Value Method D. Replacement Value Method
• Which of the following does not properly describe the depreciation process? a. It is an allocation process. b. It is consistent with the matching principle. c. It involves the use of estimates. d. It attempts to determine an asset's market value.
• Which of the following is not a factor that influences the discount rate? a. Amount of the cash flows b. Level of risk c. Investor's expected rate of return d. All of these answer choices are factors that influence the discount rate.
• Which of the following is incorrect? A. In an unlevered DCF, the WACC is the appropriate discount rate because we are discounting free cash flows that belong to all providers of capital. B. An implied share price which is above the current share price i
• An EPS/EBIT analysis is one of the most widely used techniques for determining the extent that debt or stock should be used to finance strategies to be implemented. This exercise can give you practice
• Describe the types and amounts of significant investment: 1) equity method 2) available for sale: debt equities 3) held to maturity 4) other investment look
• Respond to the following: a. What is meant by market efficiency? b. What does the efficient-markets hypothesis imply about the value of accounting information? c. Describe the three forms of the efficient-markets hypothesis.
• Which one of the following types of securities has no priority in a bankruptcy proceeding? a. Convertible bond. b. Senior debt. c. Common stock. d. Preferred stock. e. Straight bond.
• What are the critical performance dimensions for a) a retailer and b) a financial services company that should be considered in credit analysis? What ratios would you suggest looking at for each of
• The comparative financial statements of Marshall Inc. are given in the following tables. The market price of Marshall's common stock was $82.80 on December 31, 20Y2. Determine the following measure for 20Y2: Quick ratio. Assume a 365-day year. || Marsha
• Instructions: Determine the following measures for 2013: 1. Working capital 2. Current ratio 3. Quick ratio Rainbow Paint Co.'s comparative financial statements for the years ending December 31, 2013 and 2012 are as follows. The market price of Rainbow Pa
• Which of the following is incorrect? A. An implied share price which is above the current share price indicates that the shares are selling at a discount. B. In an unlevered DCF, the WACC is the appropriate discount rate because we are discounting free c
• Which is the most stringent test of a company's ability to meet its current obligations? \\A. Times interest earned. \\B. Debt-equity ratio. \\C. Current ratio. \\D. Quick ratio.
• Which of the following does not represent an advantage of the unadjusted rate of return over the payback method for evaluating capital projects? (a) The unadjusted rate of return method considers the investment's profitability (b) The unadjusted rate of r
• Which of the following are financial measures of performance? a) Controllable margin b) Product quality c) Labor productivity 1) Choice c 2) Choice a 3) Choice a and c 4) Choice b
• Which of the following statements is correct? A. Separating the amount received from the issuance of bonds with detachable warrants into debt and equity components usually results in a premium on bonds. B. The use of the proportional method for allocating
• The ability to earn a satisfactory return on investments is called: a. liquidity. b. leverage. c. profitability. d. turnover.
• What is the key criterion for using the equity method of accounting for equity securities?
• The ability to earn a satisfactory return on investments is called: a. turnover. b. liquidity. c. leverage. d. profitability.
• In a troubled debt restructuring where the debtor elects to transfer an equity interest to a creditor in exchange for the satisfaction of an outstanding debt: a) any difference between market value o
• Determine the term/phrase being defined or described by the following statement: An advantage of incorporation. Choose from the following: | Incorporators | Cumulative preferred stock | Registrars | Treasury stock | Better debt to equity ratio | Article
• Sarbanes-Osley was passed in response in which of the following? A) The stock market crash of 2002 B)The savings and loan bailout C) The accounting scandals of WorldCom and Error D) The mounting g
• A financial market in which only short-term debt instruments are traded is called the _______ market. A) bond B) money C) capital D) stock
• The Eurocurrency market serves as a place to store excess liquidity for multinational corporations, countries, and individuals because of all of the following except: a. Lack of regulation allows investors to hold debt securities in bearer form. b. The
• TMZ Corp. has a market beta of 0.75, is subject to an income tax rate of 35 percent, has a risk-free rate of 4.5 percent, a market risk premium of 8 percent, and has a market value of debt to market value of equity ratio of 60 percent, what does the marke
• Operating leverage is best described as Select one: a. a measure of the extent to which an organization's contribution margin is sensitive to levels of debt. b. a measure of the extent to which an
• What is the efficient market hypothesis in capital market research? What are the assumptions about efficiency that are typically adopted in capital markets research?
• If given the following, calculate the Margin of Safety in dollars and percentage while explaining your calculation steps: Sales:600,000 Variable:30% Fixed:140,000
• In capital budgeting, what will be the effect on the following if there is an increase in the discount rate? Net Present Value Internal Rate of Return A) Decrease Increase B) Decrease Decrease C) Decrease No Effect D) IncreaseNo Effect E) Increase Increa
• Which of the following may be useful when comparing potential investments of different sizes? a) Accounting Rate of Return b) Profitability index c) Future value of net cash inflows d) Payback method
• What impact do investors' expectations about inflation have on a firm's cost of debt? Is the firm's cost of equity affected?
• Which of the following is a finding of previous capital market research studies? A) The market is not fooled by arbitrary accounting numbers. B) The direction of change in reported accounting earning is inversely correlated with security price movements.
• Creditors would prefer: 1. a quick ratio of 1.2 to a quick ratio of 0.8 2. a quick ratio of 0.8 to a quick ratio of 1.2 3. days sales outstanding of 46 to a days sales outstanding of 35 4. days sales outstanding of 35 to a days sales outstanding of 46 a.
• In an efficient securities market, the market value of a security is equal to: a. par value. b. its liquidation value. c. its book value. d. its intrinsic value.
• Comparative analysis can help management plan for more favorable conditions. For example, if the solvency ratio of debt to assets is too high, what might management do to align it more with industry standard or competitors?
• A customer opens a new margin account with the following position: Market Value: $100,000 Debit Balance: $50,000 If the market value goes up to $120,000, how much is there in SMA, if any? A. 0 B. $5,000 C. $10,000 D. $20,000
• Using the following comparative financial statements of Marshall Inc., determine the following measure for 20Y2: Quick Ratio. The market price of Marshall common stock was $82.60 on December 31, 20Y2. || Marshall Inc.'s Comparative Retained Earnings Sta
• Which of the following measures the average relationship between a stock's returns and the market's returns? a. Coefficient of validation. b. Standard deviation. c. Geometric regression. d. Beta coefficient.
• Determine whether the following action in buying, selling, or accounting for inventories is ethical or unethical. Give your reason for each answer. In applying the lower-of-cost-and-net-realizable-value rule to inventories, Terre Haute Industries recorded
• In an efficient securities market, the market value of a security is equal to: a. its liquidation value. b. its book value. c. its intrinsic value. d. par value.
• When the fair market value rules are followed, which of the following is true when the market value of the stocks in the Trading Securities account falls below their cost? a. The Unrealized Losses on Trading Securities account is credited. b. The Recovery
• Which of the following is not true concerning return on investment (ROI)? a. Using return on investment as a basis for measuring performance can lead to underinvestment. b. Return on investment can be further broken down into: (income/sales) x (sales/li
• Which of the following methods is used to account for long-term investments in equity securities when the investor has a significant influence? A. Market value method B. Investment method C. Equity method D. Consolidation method
• In measuring the value of a liability, which measurement base uses the discounted future net cash outflows that are expected to settle the obligation in the normal course of business? A. Realisable value. B. Present value. C. Historical cost. D. Cur
• Which of the following statements does not apply to the market model? A) It is a simpler approach than the standard version of the capital asset pricing model. B) This approach is seldom used in accounting research. C) In this model, the risk-free return
• Which of the following is not a source of borrowings for a bank? A) Federal funds. B) Eurodollars. C) Transaction deposits. D) Discount loans.
• Which of the following measures the average relationship between a stock's returns and the market's returns? a. standard deviation b. beta coefficient c. geometric regression d. coefficient of validation
• Using the following comparative financial statements of Marshall Inc., determine the following measure for 20Y2: Price-earnings ratio. The market price of Marshall common stock was $82.60 on December 31, 20Y2. || Marshall Inc.'s Comparative Retained Ear
• Which of the following instruments are traded in a capital market? A) U.S. Government agency securities. B) Negotiable bank CDs. C) Repurchase agreements. D) U.S. Treasury bills.
• According to AASB, 1053 Application of Tiers of Australian Accounting Standards, a for-profit private sector entity has public accountability if: a. its debt or equity instruments are traded in a public market. b. It is in the process of issuing debt or e
• Identify similarities and differences in accounting for long-term investments in debt securities that are held-to-maturity versus those available-for-sale.
• Which of the following statements about the characteristics of debt and equities is true? A) They can both be long-term financial instruments. B) Bond holders are residual claimants. C) The income from bonds is typically more variable than that from equit
• An effective capital allocation process: A) promotes productivity. B) encourages innovation. C) provides an efficient market for buying and selling securities. D) All of these.
• Another term for the acid-test ratio is: a. Quick ratio. b. Liquidity ratio. c. Speed ratio. d. Panic ratio.
• Complete the following sentence with the most appropriate term or phrase: Markets for short-term debt securities are called __________ markets, while markets for long-term debt and equity are called __________ markets.
• Determine the term being defined by the following statement: Examination of financial data across time. Choose from the following choices: | Market prospects | Financial statement analysis | Debt-to-equity ratio | Comparative financial statement | Prof
• Answer the following questions on financial leverage, value, and return: a. Define financial risk b. Should the investor select the origination LTV that maximizes the IRR on equity? Explain why or why not.
• Evaluate the effectiveness of the accounting principle guidelines for determining the market value of an asset, indicating improvements to these guidelines. Provide support for your recommendations.
• Which of the following techniques uses time value of money concepts? a) payback method b) internal rate of return c) accounting rate of return d) relative sales value method