11. The percent of fixed assets to total assets is an example of: A. vertical analysis.B. solvency analysis.C. profitability analysis.D. horizontal analysis.
12. What type of analysis is indicated by the following?
Increase (Decrease*)
2012
2011
Amount
Percent
Current assets
$ 380,000
$ 500,000
$120,000*
24%*
Fixed assets
1,680,000
1,500,000
180,000
12%
A. Vertical analysisB. Horizontal analysisC. Liquidity analysisD. Common-size analysis
13. An analysis in which all the components of an income statement are expressed as a percentage of net sales is called: A. vertical analysis.B. horizontal analysis.C. liquidity analysis.D. common-size analysis.
14. Horizontal analysis of comparative financial statements includes the: A. development of common-size statements.B. calculation of liquidity ratios.C. calculation of dollar amount changes and percentage changes from the previous to the current year.D. evaluation of financial statement data.
15. Which of the following generally indicates a positive change? A. Earnings per share decreasesB. The debt to total assets ratio increasesC. The acid test ratio decreasesD. The return on equity increases
16. Return ratios are measures of the relationship between the: A. profit earned and the investment made in the company by the various groups of creditors and investors.B. revenue earned and the total equity of a company.C. total equity of a company and its cash flows for the period.D. profitability and liquidity aspects of a company.
17. In considering equity and debt financing, which of the following statements is generally true? A. The lower the measure of the long-term debt to equity ratio, the greater the likelihood that the company will have difficulty in meeting its obligation in some future period.B. Interest and dividend payments are not required to be made by the issuing company.C. The higher the measure of the debt to equity ratio, the greater the likelihood that the company will have difficulty in meeting its obligation in some future period.D. Most companies prefer to have no debt and rely exclusively on equity financing.
18. Emerald Company issued additional shares of stock. Which of the following is true with regard to the effect of the stock issuance transaction on Emerald’s ratio computations? A. Earnings per share decreasesB. The debt to equity ratio increasesC. The asset turnover ratio increasesD. Return on equity remained unchanged
19. Ruby Company sold inventory on credit. Its gross profit percentage is 23%. The effect of this transaction is that the: A. current ratio was unchanged.B. earnings per share increased.C. working capital decreased.D. debt to equity ratio increased.
20. Which of the following is considered a profitability ratio? A. Return on equityB. Acid test ratioC. Inventory turnover ratioD. Debt to equity ratio
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