Which financial ratio indicates the percentage of profit that is paid out as dividends? dividend payout ratio 2. Constant dollars are dollars adjusted for inflation to make them comparable over various years. True 3. According to Schilit, the search for hidden weaknesses in a company’s performance is known as forensic accounting. 4. Which of the following is NOT one of the categories of important financial ratios that is mentioned in the text to help assess an organization’s overall financial situation? asset management ratios 5.

Which financial ratio shows the return on all of the assets under its control regardless of source of financing? return on investment 6. Which of the following financial ratios is not a profitability ratio? asset turnover 7. To get a proper picture of the position of the organization, common-size statements and ratios should be compared to industry-wide average trends 8. When conducting a financial analysis, select and discuss those financial ratios that have an impact on the company’s problems. True 9. Net profit margin is what type of financial ratio? profitability ratio 10.

Which financial ratio measures the extent to which borrowed funds have been used to finance the company’s assets? debt to equity ratio 11. According to Schilit, unusually high good will gains related to recent acquisitions is a red flag, suggesting an underlying problem. True 12. One of the most important categories of financial ratios are the liquidity ratios. True 13. Among the most useful and important documents that can be used to understand why actions were taken are annual reports. 14. Which financial ratio measures the extent to which the company’s capital is in cash or cash equivalents? ash ratio 15. The amount of change from one year to the next in GDP indicates how much that country’s economy is growing. True 16. Which financial ratio indicates the number of days of cash on hand, at present sales levels? days of cash 17. At what Z-value level is a firm considered in serious trouble? below 1. 81 18. Inventory turnover and asset turnover are both examples of which type of financial ratio? activity ratio 19. Which financial ratio indicates how much after-tax profit is generated by each dollar of sales? net profit margin 0. A company’s annual report from the year of the case can be helpful, but the 10-K form is not beneficial for those conducting a case analysis. False 21. If the corporation being studied appears to be in poor financial condition, use Altman’s Bankruptcy Formula to calculate its Z-value. True 22. ________ is used worldwide and measures the total output of goods and services within a country’s borders. GDP 23. Which financial indicator is calculated by the ratio of market price per share to earnings per share? price/earnings ratio


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