41. Which of the following statements is correct?
A. When cost of goods sold as a percentage of sales increases the gross margin percentage will increase.
B. It is possible for cost of goods sold in dollars to increase while cost of goods sold as a percentage of sales decreases.
C. If gross margin percentage is the same for the current and past year, then sales and cost of goods sold in dollars did not change.
D. If gross margin percentage increases from one year to the next, then the net income percentage will also increase from one year to the next.
42. Which of the following statements is incorrect?
A. If selling and administrative expenses as a percentage of sales increases, then gross margin percentage will decrease.
B. If the cost of goods sold percentage decreases and other expenses do not change, then profit margin will increase as a percentage of sales.
C. If sales dollars decrease, a company might still report a higher gross profit percentage if cost of goods sold decreases at a faster rate than the decrease in sales.
D. It is possible for selling and administrative expense in dollars to decrease, while selling and administrative expenses as a percentage of sales to increase.
43. During 2010, Home Style's cost of goods sold percentage was 68.2% and selling and store operating costs was 19.3% of sales. During 2009, their cost of goods sold percentage was 68.9% while selling and store operating costs was 19.2% of sales. What effect would the change in these percentages have on 2010's gross margin percentage and profit margin percentage?
A. The decrease in the cost of goods sold percentage would increase both the gross margin and profit margin percentages, but the increase in the selling and store operating costs percentage would decrease both the gross margin and profit margin percentages.
B. The decrease in the cost of goods sold percentage would decrease both the gross margin and profit margin percentages, but the increase in the selling and store operating costs would increase both the gross margin and profit margin percentages.
C. The decrease in the cost of goods sold percentage would increase both the gross margin and profit margin percentages and the decrease in the selling and store operating costs percentage would decrease the profit margin percentage.
D. The decrease in the cost of goods sold percentage would decrease both the gross margin and profit margin percentages, but selling and store operating costs would increase the profit margin percentage.
44. Which of the following ratios is not considered to be a test of profitability?
A. Current ratio
B. Profit margin
C. Return on assets
D. Earnings per share
45. The records of Everyday Electronics Corporation for a particular period include the following:
What is the return on equity ratio?
A. 13.2%.
B. 23.8%.
C. 24.0%.
D. 8.4%.
46. The records of Marshall Company include the following:
The return on assets is (round to the nearest tenth of a percent)
A. 14.9%.
B. 18.3%.
C. 15.3%.
D. 14.7%.
47. The records of Marshall Company include the following:
The return on equity is (round to the nearest tenth of a percent)
A. 21.1%.
B. 10.2%.
C. 16.4%.
D. 17.1%.
48. The records of Marshall Company include the following:
The financial leverage percentage is which of the following?
A. 1.8%
B. 2.8%.
C. 5.8%.
D. 6.4%.
49. Which of the following transactions decreases earnings per share?
A. Declaring cash dividends payable to the common stockholders.
B. Purchasing treasury stock.
C. The accrual of revenue.
D. Declaring and distributing a 10% common stock dividend.
50. Which of the following transactions decreases earnings per share?
A. Collection of an account receivable.
B. Selling treasury stock for an amount less than its cost.
C. A decrease in the market value per share.
D. Paying cash in advance for rent.
