Deck 11: Suggestions for Case Analysis

Question 1

"Days of inventory" is an example of an)

A) leverage ratio.
B) liquidity ratio
C) activity ratio.
D) asset management ratio.
E) profitability ratio.

Answer 1

C

Question 2

The ratio that indicates how much of the anticipated growth rate of sales can be sustained by internally generated funds is the

A) index of sustainable growth.
B) z-value.
C) operating cash flow.
D) free cash flow.
E) debt to equity ratio.

Answer 2

A

Question 3

Ratios which measure the contributions of owners' financing compared with creditors' financing are

A) leverage ratios.
B) liquidity ratios.
C) activity ratios.
D) asset management ratios.
E) profitability ratios.

Answer 3

A

Question 4

In the Strategic Audit, which of the following is included in a corporation's Strategic Posture?

A) Objectives
B) Programs
C) Budgets
D) Procedures
E) Performance

Question 5

Ratios which measure the degree of the corporation's success in achieving desired profit level are

A) leverage ratios.
B) liquidity ratios.
C) activity ratios.
D) asset management ratios.
E) profitability ratios.

Question 6

To get a proper picture of the position of the organization, common-size statements and ratios should be compared to

A) the organization's future historical performance.
B) the leading competitor in the industry.
C) the financial performance of the overall U.S. gross domestic production GDP).
D) the direct competitor least like the organization.
E) industry-wide average trends.

Question 7

"Earnings per share" is an example of an)

A) leverage ratio.
B) liquidity ratio
C) activity ratio.
D) asset management ratio.
E) profitability ratio.

Question 8

The formula which predicts the likelihood of a corporation going bankrupt is called

A) the return on investment.
B) the CAPM.
C) the correlation coefficient.
D) the risk factor.
E) the Z-value.

Question 9

Converting categories on financial statements from dollar terms to percentages results in

A) inflation-adjusted statements.
B) diverse rates of returns.
C) common-size statements.
D) constant dollar denominations
E) equivalency comparison

Question 10

What benefit does converting sales and profits to constant dollars in times of inflation offer when analyzing a case?

A) It is helpful in predicting the future potential of the organization.
B) It contributes to determining the risk factors when computing the Z-value.
C) It shows the true performance of the corporation in comparison with that of the industry or the economy in general.
D) It is easier for the financial analyst to judge the effectiveness of management's decision-making.
E) It provides a method which is familiar and easy to understand.

Question 11

The function of the Strategic Audit is to

A) serve as documentation when a group of students are assigned a case analysis.
B) gather data which can be entered onto a computerized program for easier analysis.
C) determine if an organization's managerial decisions have been successful.
D) provide a systematic method to organize a student's analysis.
E) provide the basis by which a teacher of a strategy and policy course can judge a student's performance.

Question 12

"Times interest earned" is an example of an)

A) leverage ratio.
B) liquidity ratio
C) activity ratio.
D) asset management ratio.
E) profitability ratio.

Question 13

In the Strategic Audit, the recommended strategy should be

A) a revised mission statement.
B) one of the strategic alternatives.
C) internally-oriented.
D) externally-oriented.
E) include appropriate programs and a budget.

Question 14

What purpose does analyzing the prime interest rates serve in case analysis?

A) For better assessment of strategic decisions to borrow money to build new facilities.
B) It serves as documentation for the case analyst for their evaluation.
C) It acts as a means to compare an organization's performance with other direct competitors.
D) It acts as a means to compare an organization's performance with the entire industry.
E) It acts as a means to compare an organization's performance with the entire economy.

Question 15

To adjust for general inflation in the U.S., what index does the text suggest?

A) Dow-Jones Industrial Average
B) New York Stock Exchange Index
C) Wiltshire 500 Equity Index
D) Consumer Price Index
E) NASDAQ Series

Question 16

Ratios which measure the corporation's ability to meet its financial obligations are

A) leverage ratios.
B) liquidity ratios.
C) activity ratios.
D) asset management ratios.
E) profitability ratios.

Question 17

At what Z-value level is a firm considered in serious trouble?

A) below 1.81
B) above 1.82
C) greater than 5.0
D) between 2.2 and 3.1
E) between 3.2 and 4.1

Question 18

Ratios which measure the effectiveness of the corporation's use of resources are called

A) leverage ratios.
B) liquidity ratios.
C) activity ratios.
D) asset management ratios.
E) profitability ratios.

Question 19

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?

A) leverage ratios
B) liquidity ratios
C) activity ratios
D) asset management ratios
E) profitability ratios

Question 20

What is the main purpose of conducting outside research into the environmental setting of the case?

A) It is a requirement of this course.
B) It provides a learning experience on library usage which is helpful in all courses.
C) It gives a realistic background of the industry during specified period.
D) It gives you clues as to what the organization should be doing in the future.
E) It furnishes large amount of data, both pertinent and extraneous.