Understanding Corporate Health through Ratio
Analysis | Verified Questions and Answers
A firm has a low or negative profit margin. What would be a potential solution? - ✔✔If the firm has
declining sales, the firm should try to generate more sales.
Which of the following measures the extent to which the owner's capital (equity) is tied up in non-liquid,
permanent, depreciable property? - ✔✔Fixed assets to net worth
If a company begins to collect its receivables slower, its collection period will? - ✔✔Increase
Internal causes are things that negatively impact a company's financial problems, but are under the
company's control. - ✔✔True
When the inventory turnover ratio becomes low and the firm uses cash to finance any changes on the
balance sheet, this will cause which of the following problems? - ✔✔Quality/Quantity of liquidity will
decrease
The only quick-fix for a company with a high fixed assets to net worth ratio is to raise external equity. -
✔✔True
The causal ratios tell us whether or not a firm has a problem. - ✔✔False
Sometimes a company can offset its financial problem by doing other things well. This is called
developing a compensating advantage. - ✔✔True
If an undertrader wants to improve its financial condition, it could: - ✔✔Stimulate sales growth and sell-
off excess facilities in non-growing division
Analysis | Verified Questions and Answers
A firm has a low or negative profit margin. What would be a potential solution? - ✔✔If the firm has
declining sales, the firm should try to generate more sales.
Which of the following measures the extent to which the owner's capital (equity) is tied up in non-liquid,
permanent, depreciable property? - ✔✔Fixed assets to net worth
If a company begins to collect its receivables slower, its collection period will? - ✔✔Increase
Internal causes are things that negatively impact a company's financial problems, but are under the
company's control. - ✔✔True
When the inventory turnover ratio becomes low and the firm uses cash to finance any changes on the
balance sheet, this will cause which of the following problems? - ✔✔Quality/Quantity of liquidity will
decrease
The only quick-fix for a company with a high fixed assets to net worth ratio is to raise external equity. -
✔✔True
The causal ratios tell us whether or not a firm has a problem. - ✔✔False
Sometimes a company can offset its financial problem by doing other things well. This is called
developing a compensating advantage. - ✔✔True
If an undertrader wants to improve its financial condition, it could: - ✔✔Stimulate sales growth and sell-
off excess facilities in non-growing division
