54. Which of the following helps analysts understand the relationship between two financial statement items?
A)common-sized financial statements
B)performance analysis
C)ratio analysis
D)trend analysis
55. Which of the following statements about the current ratio is false?
A)it includes inventories
B)it is a measure of profitability
C)it is equal to current assets divided by current liabilities
D)it is affected by the accounting methods used by a company
56. Which of the following statements about sources of external standards for evaluating firm's performance is false?
A)Much of the information provided by investor services comes from firms' annual reports
B)Investor services often provide comparative ratios as well as other financial information
C)Investor services must follow SEC guidelines for reporting form and terminology used
D)All the information available to internal users is not provided by external sources
57. What are the two elements of return on assets?
A)return on equity and return on sales
B)return on equity and asset turnover
C)return on sales and asset turnover
D)return on sales and profit margin
58. The total asset turnover ratio measures
A)how well a firm uses its assets to produce sales
B)the rate of return on a firm's investment in assets
C)the portion of assets that has been financed by investors
D)the portion of assets that has been financed by creditors
59. Which of the following statements about the current ratio is false?
A)A firm with a higher current ratio is better off than one with a lower current ratio
B)It is determined by dividing current assets by current liabilities
C)It is affected by the accounting methods firms use
D)It is larger than the quick ratio
60. When decision-makers want to know how well a firm manages the amounts owed to them by customers as compared to other firm's, they should use
A)current ratio
B)asset turnover
C)cash flow per share
D)average collection period
61. Which of the following would be most useful to you in deciding whether or not to make a short-term loan to a firm?
A)return on assets
B)return on sales
C)current ratio
D)EPS
62. Which combination of ratios describes the length of the operating cycle?
A) Days in the Selling Period + Days in the Collection Period
B) Days in the Collection Period + Days in the Payment Period
C) Days in the Collection Period + Days in the Selling Period + Days in the Payment Period
D) Days in the Payment Period + Days in the Selling Period
63. Which of the following ratios would be computed automatically in performing vertical analysis of an income statement?
A)dividend payout ratio
B)earnings per share
C)return on sales
D)current ratio
