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Which of the following statements about the Price/Earnings ratio is not correct?


A) The Price/Earnings ratio indicates how much investors are willing to pay for a share of a company's stock as a multiple of current earnings.
B) A high Price/Earnings ratio may mean that investors have pushed the price of the stock up in anticipation of higher future net income.
C) If EPS decreases and there is no change in the market price of the stock,the Price/Earnings ratio will decrease.
D) If the market price of the stock increases and there is no change in EPS,the Price/Earnings ratio will increase.

E) B) and C)
F) B) and D)

Correct Answer

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Which of these are solvency ratios?


A) Debt-to-assets
B) Current ratio
C) Return on equity
D) Net profit margin

E) A) and B)
F) A) and D)

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If a company increases the selling price of the product it sells and all other data on the financial statements remains the same,which of the following ratios will be unaffected?


A) Fixed asset turnover
B) Net profit margin
C) Inventory turnover
D) Earnings per share

E) A) and D)
F) B) and C)

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Vertical analysis:


A) identifies the relative contribution made by each financial statement line item.
B) identifies trends over time.
C) provides an understanding of the relationships among various items on financial statements by expressing the differences in terms of dollars.
D) involves comparing amounts across different financial statements.

E) A) and D)
F) B) and C)

Correct Answer

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Which of the following ratios is a solvency ratio?


A) Net profit margin ratio
B) Current ratio
C) Fixed asset turnover ratio
D) Debt-to-assets ratio

E) B) and D)
F) A) and C)

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The following information is taken from the financial statements of Clybourn Company for the current year: The following information is taken from the financial statements of Clybourn Company for the current year: On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold? A) 76% B) 24% C) 31% D) 18% On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?


A) 76%
B) 24%
C) 31%
D) 18%

E) A) and B)
F) A) and C)

Correct Answer

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Which of these ratios measure liquidity?


A) Receivables turnover
B) Net profit margin
C) Debt-to-assets ratio
D) Fixed asset turnover

E) A) and C)
F) A) and B)

Correct Answer

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If net income is rising,but net sales revenue and the gross profit percentage remain the same,then:


A) operating expenses are falling.
B) operating expenses are rising.
C) cost of goods sold is falling.
D) cost of goods sold is rising.

E) A) and D)
F) A) and C)

Correct Answer

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Which of the following measures would assist in assessing the profitability of a company?


A) Debt-to-assets ratio
B) Fixed asset turnover ratio
C) Receivables turnover ratio
D) Current ratio

E) None of the above
F) All of the above

Correct Answer

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Campbell Co.has net sales revenue of $1,000,000,cost of goods sold of $680,000,and all other expenses of $232,000.The beginning balance of stockholders' equity is $320,000 and the beginning balance of fixed assets is $288,800.The ending balance of stockholders' equity is $480,000 and the ending balance of fixed assets is $311,200.The fixed asset turnover ratio is closest to:


A) 0.53.
B) 2.50.
C) 3.33.
D) 0.80.

E) None of the above
F) A) and C)

Correct Answer

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The ratio that measures how many times a company replenishes its inventory in a year is the:


A) days to sell ratio.
B) receivables turnover ratio.
C) inventory turnover ratio.
D) days to collect ratio.

E) All of the above
F) C) and D)

Correct Answer

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Assume the following sales data for a company: Assume the following sales data for a company: By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively? A) 40.0% and (10.7%) B) 28.6% and (12.0%) C) 40.0% and (15.0%) D) 32.0% and (10.7%) By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively?


A) 40.0% and (10.7%)
B) 28.6% and (12.0%)
C) 40.0% and (15.0%)
D) 32.0% and (10.7%)

E) B) and C)
F) None of the above

Correct Answer

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Hubbard Company had 8,000 shares of common stock outstanding throughout the year.The following information is also available: Hubbard Company had 8,000 shares of common stock outstanding throughout the year.The following information is also available: Required: Calculate the Price/Earnings ratio at the end of the current year. Required: Calculate the Price/Earnings ratio at the end of the current year.

Correct Answer

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EPS = Net income/Average commo...

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A company that has a current ratio less than one cannot cover:


A) current liabilities with its current cash flow.
B) current expenses with its current sales revenue.
C) expenses with its current revenues.
D) current liabilities with its current assets.

E) A) and C)
F) None of the above

Correct Answer

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Which income statement line item had the largest percentage increase from the prior year to the current year? Which income statement line item had the largest percentage increase from the prior year to the current year? A) Depreciation Expense B) Cost of Goods Sold C) Interest Expense D) Sales


A) Depreciation Expense
B) Cost of Goods Sold
C) Interest Expense
D) Sales

E) B) and C)
F) C) and D)

Correct Answer

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If an analyst wants to examine a company's current ability to generate income,which of the following would best be considered?


A) Liquidity
B) Market share
C) Profitability
D) Solvency

E) A) and D)
F) None of the above

Correct Answer

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Which of the following ratios is calculated by dividing current assets by current liabilities?


A) Return on equity ratio
B) Current ratio
C) Net profit margin ratio
D) Fixed asset turnover ratio

E) C) and D)
F) None of the above

Correct Answer

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Which of these is not one of the categories of ratio analysis?


A) Profitability
B) Liquidity
C) Solvency
D) Probability

E) All of the above
F) C) and D)

Correct Answer

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Which of the following measures would assist in assessing the solvency of a company?


A) Debt-to-assets and times interest earned
B) Fixed asset turnover and EPS
C) Return on equity and debt-to-assets
D) Current ratio and times interest earned

E) All of the above
F) None of the above

Correct Answer

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The following information comes from the balance sheets and income statements of Crosby Co.: The following information comes from the balance sheets and income statements of Crosby Co.: What is the times interest earned ratio for the current year? A) 2.2 B) 5.2 C) 6.2 D) 8.0 What is the times interest earned ratio for the current year?


A) 2.2
B) 5.2
C) 6.2
D) 8.0

E) All of the above
F) A) and D)

Correct Answer

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