Pactice Questions for BBA 5th Semester M1
1. Which of the following would best explain a situation where the ratio of (net income/total
equity) of a firm is higher than the industry average, while the ratio of (net income/total
assets) is lower than the industry average?
A. The firm's net profit margin is higher than the industry average.
B. The firm's asset turnover is higher than the industry average.
C. The firm's equity multiplier must be lower than the industry average.
D. The firm's debt ratio is higher than the industry average.
E. None of these is correct.
2. Ferris Corp. wants to increase its current ratio from the present level of 1.5 when it closes
the books next week. The action of __________ will have the desired effect.
A. payment of current payables from cash
B. sales of current marketable securities for cash
C. write down of impaired assets
D. delay of next payroll
E. None of these is correct.
3. Assuming continued inflation, a firm that uses LIFO will tend to have a(n) _______
current ratio than a firm using FIFO, and the difference will tend to __________ as time
passes.
A. higher; increase
B. higher; decrease
C. lower; decrease
D. lower; increase
E. identical; remain the same
4. A firm's current ratio is above the industry average; however, the firm's quick ratio is
below the industry average. These ratios suggest that the firm ________.
A. has relatively more total current assets and even more inventory than other firms in the
industry
B. is very efficient at managing inventories
C. has liquidity that is superior to the average firm in the industry
D. is near technical insolvency
E. None of these is correct.
5. Which of the following ratios gives information on the amount of profits reinvested in the
firm over the years?
A. Sales/total assets
