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FINA 4011 - HOMEWORK REVIEW - EXAM
1 PREP 2026 ACTUAL QUESTIONS WITH
VERIFIED ANSWERS.
Which of the following ratios is the best measure of a
company's efficiency.
a) Asset turnover
b) ROE
c) Current ratio
d) Quick ratio - correct answer-a) Asset turnover
Which of the following ratios is the best measure of a
company's leverage?
a) Debt to equity ratio
b) Cash ratio
c) ROA
d) Average collection period - correct answer-a) Debt to equity
ratio
Which of the following ratios is the best measure of a
company's liquidity?
a) Current ratio
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b) Interest coverage
c) ROC
d) Profit margin - correct answer-a) Current ratio.
Which of the following assets is the most liquid asset?
a) Cash and cash equivalents
b) Account receivable
c) Inventory
d) Property, plant and equipment - correct answer-a) Cash and
cash equivalents.
Which of the following ratios are not directly related to DuPont
analysis?
a) Return on equity
b) Inventory turnover
c) Asset turnover
d) Leverage ratio - correct answer-b) Inventory turnover.
Decomposition of ROE based on DuPont analysis suggests
that a company with __________ is more likely to have higher
ROE compared to the others, all else being equal.
a) higher debt-to-equity ratio
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b) lower leverage ratio
c) lower asset turnover
d) higher average collection period - correct answer-a) higher
debt-to-equity ratio.
Here is the result of DuPont analysis for company A and B
following the equation:
Company A: 20% = 80% x 95% x 15% x 80% x 220%.
Company B: 40% = 75% x 90% x 33% x 90% x 200%.
ROE of the company B is higher than that of company A
because __________.
a) Company B is more aggressive in issuing debt.
b) Company B runs its assets more efficiently to generate
revenue.
c) Company B has lower interest burden than company A.
d) Company B pays relatively less tax than company A. -
correct answer-b) Company B runs its assets more efficiently to
generate revenue.
Which of the following statements about problems of financial
ratio analysis is FALSE?
a) Cost of goods sold can be measured differently depending
on inventory valuation methods such as LIFO and FIFO.
FINA 4011 - HOMEWORK REVIEW - EXAM
1 PREP 2026 ACTUAL QUESTIONS WITH
VERIFIED ANSWERS.
Which of the following ratios is the best measure of a
company's efficiency.
a) Asset turnover
b) ROE
c) Current ratio
d) Quick ratio - correct answer-a) Asset turnover
Which of the following ratios is the best measure of a
company's leverage?
a) Debt to equity ratio
b) Cash ratio
c) ROA
d) Average collection period - correct answer-a) Debt to equity
ratio
Which of the following ratios is the best measure of a
company's liquidity?
a) Current ratio
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b) Interest coverage
c) ROC
d) Profit margin - correct answer-a) Current ratio.
Which of the following assets is the most liquid asset?
a) Cash and cash equivalents
b) Account receivable
c) Inventory
d) Property, plant and equipment - correct answer-a) Cash and
cash equivalents.
Which of the following ratios are not directly related to DuPont
analysis?
a) Return on equity
b) Inventory turnover
c) Asset turnover
d) Leverage ratio - correct answer-b) Inventory turnover.
Decomposition of ROE based on DuPont analysis suggests
that a company with __________ is more likely to have higher
ROE compared to the others, all else being equal.
a) higher debt-to-equity ratio
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b) lower leverage ratio
c) lower asset turnover
d) higher average collection period - correct answer-a) higher
debt-to-equity ratio.
Here is the result of DuPont analysis for company A and B
following the equation:
Company A: 20% = 80% x 95% x 15% x 80% x 220%.
Company B: 40% = 75% x 90% x 33% x 90% x 200%.
ROE of the company B is higher than that of company A
because __________.
a) Company B is more aggressive in issuing debt.
b) Company B runs its assets more efficiently to generate
revenue.
c) Company B has lower interest burden than company A.
d) Company B pays relatively less tax than company A. -
correct answer-b) Company B runs its assets more efficiently to
generate revenue.
Which of the following statements about problems of financial
ratio analysis is FALSE?
a) Cost of goods sold can be measured differently depending
on inventory valuation methods such as LIFO and FIFO.
