18 Questions
Why do engineering firms require longer term financial plans?
Due to long lead times needed for capital projects
What does an operating budget indicate?
Expenditures, revenues, or profits planned for some future period regarding operations
What is the main purpose of a performance appraisal?
To provide employees with a guide on how to do their jobs better in the future
Which of the following is NOT typically found in a statistical report within an engineering firm?
Operating budget figures
Why is a three-year financial plan useful for an engineering firm involved in constructing the Light Rail Transit (LRT)?
Because of the long lead times needed for capital projects
How do figures in an operating budget function as per the text?
As standard measurements for performance
What does the acid-test ratio measure?
The firm's ability to cover current liabilities with current assets
How is the current ratio computed?
Current assets / current liabilities
What does the inventory turnover ratio measure?
The number of times an inventory is sold each year
Which ratio is used to measure the utilization of a company's fixed assets?
Fixed asset turnover ratio
What does the debt to total assets ratio show?
How much of the firm's assets are financed by debt
Which ratio indicates a company's ability to pay off short-term obligations without selling inventories?
Current ratio
What is the primary purpose of analyzing changes in figures on income statements when compared to previous years?
To determine if the company did well
In financial ratio analysis, what does the comparison of a pair of accounts to constitute a ratio help achieve?
Determining deviations from norms
Which type of financial ratio focuses on a company's ability to meet its current obligations?
Liquidity ratios
What is the purpose of comparing financial ratios to required norms in financial analysis?
To identify deviations for further investigation
Which category of financial ratio analysis focuses on how effectively a company utilizes its assets?
Efficiency ratios
What action is usually taken when deviations occur in financial ratio analysis?
Explanations are sought for deviations
Test your knowledge on the importance of longer term financial plans for engineering firms, especially for capital projects with long lead times. Learn about operating budgets and their significance in planning for future expenditures, revenues, and profits.
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