Question : 91. Which of the following limitations of ratio analysis? A. use of acquisition : 1230587

91. Which of the following are limitations of ratio analysis? 
A. use of acquisition cost for assets rather than current replacement cost or net realizable value
B. latitude firms have in selecting from among various generally accepted accounting principles
C. changes in many ratios correlate with each other
D. must recognize conditions that have changed between the periods being compared when comparing the size of a ratio between periods for the same firm
E. all of the above

92. The traditional use of the term _____  financial statements refers to projected financial statements based on some set of assumptions about the future. One set of assumptions might be that historical patterns (for example, growth rates or rates of return) will continue.  
A. what-if
B. estimated
C. planned
D. pro forma
E. future

93. The preparation of pro forma financial statements typically begins with the _____, followed by the _____ and then the _____. 
A. balance sheet;  income statement; statement of cash flows
B. statement of cash flows; income statement; balance sheet
C. income statement; balance sheet; statement of cash flows
D. income statement; statement of cash flows;  balance sheet
E. balance sheet; statement of cash flows; income statement

94. What is the first step in preparing pro forma financial statements? 
A. Project operating revenues.
B. Project operating expenses other than the cost of financing and income taxes.
C. Project the assets required to support the level of projected operating activity.
D. Project the financing (liabilities and contributed capital) required to fund the level of assets.
E. Project the cost of financing the debt, income tax expense, net income, dividends, and the change in retained earnings.

95. What is the last step in preparing pro forma financial statements? 
A. Project the statement of cash flows from amounts on the projected balance sheet and income statement.
B. Project operating revenues and operating expenses other than the cost of financing and income taxes
C. Project the assets required to support the level of projected operating activity
D. Project the financing (liabilities and contributed capital) required to fund the level of assets
E. Project the cost of financing the debt, income tax expense, net income, dividends, and the change in retained earnings

96. Why would a firm prepare pro forma financial statements? 
A. to ascertain whether operations will generate sufficient cash flows to finance expenditures on long-term assets or whether the firm will need to borrow more
B. to analyze the effect of a change its product lines or pricing policies and the impact on rates of return.
C. to project future financial statement amounts for an acquisition target to ascertain the price it should pay
D. all of the above
E. none of the above

97. Which of the following ratios is not a measure of profitability? 
A. rate of return on assets
B. rate of return on common stockholders’ equity
C. earnings per share of common stock
D. rate of return on preferred stockholders’ equity
E. all of the above

98. Which ratio measures a firm’s performance in using assets to generate earnings independent of how the firm financed acquisition of those assets? 
A. rate of return on assets
B. rate of return on common stockholders’ equity
C. earnings per share of common stock
D. rate of return on preferred stockholders’ equity
E. none of the above

99. The rate at which accounts receivable turnover 
A. indicates how quickly a firm collects cash
B. equals sales revenue divided by average accounts receivable
C. is often expressed in terms of the average number of days that elapse between the time the firm makes the sale and the time it later collects the cash
D. all of the above
E. none of the above

100. The fixed asset turnover ratio 
A. measures the relation between sales and the investment in fixed assets such as property, plant, and equipment
B. measures the amount of sales generated from a particular level of investments in fixed assets
C. is calculated by dividing sales by the average fixed assets for the period
D. all of the above
E. none of the above