Question

1.A firm's current ratio is below the industry average; however, the firm's quick ratio is above 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.	has liquidity that is superior to the average firm in the industry
	C.	has relatively less total current assets and less inventory than other firms in the industry
	D.	is near technical insolvency
	E.	is very efficient at managing inventories

2,The present value of growth opportunities (PVGO) is equal to

I) the difference between a stock's price and its no-growth value per share.

II) the stock's price.

III) zero if its return on equity equals the discount rate.

IV) the net present value of favourable investment opportunities.

	A.	III and IV
	B.	II and IV
	C.	I and IV
	D.	I, III, and IV
	E.	II, III, and IV

Answer 1

Ans 1: A firm's current ratio is below the industry average; however, the firm's quick ratio is above the industry average. These ratios suggest that the firm- Answer is option A

A. Has relatively more total current assets and even more inventory than other firms in the industry. Because the quick ratio is must considered a more conservative measure than the current ratio, that is current assets as coverage for current liabilities.

Option B is if liquidity is superior industry cannot reach its long term goals

Option C has relatively less total current assets and less inventory than other firms in the industry, connot meet working capital requirements.

Option D is near technical insolvency no its related to bank.

Option E is very efficient at managing inventories here not only inventry matters but also other currents assets has to manage like bills recievable, dues etc.

Ans 2: The present value of growth opportunities (PVGO) is equal to

Option C I and IV that is I. The difference between a stock price and its no- growth value per share. And IV the net present value of favourable investment opportunities.

Because PVGO stands for present of growth opportunities as well as it represents company's stock value.

II. the stock's price is included in option I.

III. zero if its return on equity equals the discount rate there will leads to less reputation.