Which of the following is not a profitability ratio? | Times interest earned |

Long-term creditors are usually most interested in evaluating | profitability and solvency. |

In performing a vertical analysis, the base for sales returns and allowances is | net sales. |

Inventory turnover is calculated by dividing | cost of goods sold by the average inventory. |

Horizontal analysis evaluates financial statement data | over a period of time. |

In vertical analysis, the base amount for each income statement item is | net sales. |

Horizontal analysis evaluates a series of financial statement data over a period of time | to determine the amount and/or percentage increase or decrease that has taken place. |

The disposal of a significant component of a business is called | discontinued operations. |

Earnings per share is calculated | only for common stock. |

Trading on the equity (leverage) refers to the | use of borrowed money to increase the return to owners. |

Asset turnover measures | how efficiently a company uses its assets to generate sales. |

If equal amounts are added to the numerator and the denominator of the current ratio, the ratio will always | decrease |

Each of the following is an extraordinary item except the | losses attributable to labor strikes. |

In ratio analysis, the ratios are never expressed as a | negative figure. |

In performing a vertical analysis, the base for prepaid expenses is | total assets. |

The ratios that are used to determine a company's short-term debt paying ability are | current ratio, acid-test ratio, receivables turnover, and inventory turnover. |

A liquidity ratio measures the | short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash. |

Comparisons of financial data made within a company are called | intracompany comparisons. |

Which one of the following is not a characteristic generally evaluated in analyzing financial statements? | Marketability |

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company? | Asset turnover |

When performing vertical analysis, the base amount for administrative expense is generally | net sales. |

The ratio that uses weighted average common shares outstanding in the denominator is the | earnings per share. |

The debt to total assets ratio | is a solvency ratio. |

Ratios that measure the short-term ability of the company to pay its maturing obligations are | liquidity ratios. |

A successful grocery store would probably have | a high inventory turnover. |

The acid-test (quick) ratio | relates cash, short-term investments, and net receivables to current liabilities. |

Comparative balance sheets are usually prepared for | two years. |

Stockholders are most interested in evaluating | profitability and solvency. |

Vertical analysis is a technique which expresses each item within a financial statement | in terms of a percent of a base amount. |

Each of the following is a liquidity ratio except the | debt to total assets ratio. |

An extraordinary item is one that | occurs infrequently and is unusual in nature. |

What type of ratios best measure the short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash? | Liquidity |

Short-term creditors are usually most interested in evaluating | liquidity |

Ratios are used as tools in financial analysis | B. because they may provide information that is not apparent from inspection of the individual components of the ratio. |

The current ratio is | used to evaluate a company's liquidity and short-term debt paying ability. |

Which one of the following is not a tool in financial statement analysis? | Circular analysis |

Under which of the following cases may a percentage change be computed? | The trend of the balances is decreasing but all balances are positive. |

A supplier to a company would be most interested in the company's | current ratio. |

Which one of the following would not be considered a liquidity ratio? | Return on assets |

Net income does not appear in the numerator of the | payout ratio. |

When there has been a change in accounting principle, | the change should be reported retroactively. |

In analyzing financial statements, horizontal analysis is a | tool. |

The formula for horizontal analysis of changes since the base period is the current year amount | minus the base year amount divided by the base year amount. |

The acid-test ratio | does not include inventory as part of the numerator. |

A measure of the percentage of each dollar of sales that results in net income is | profit margin. |

If an item meets one (but not both) of the criteria for an extraordinary item, it | is reported at its gross amount as an "other revenue or gain" or "other expense or loss." |

Which one of the following would be classified as an extraordinary item? | Expropriation of property by a foreign government |

In analyzing the financial statements of a company, a single item on the financial statements | is more meaningful if compared to other financial information. |

In common size analysis, | a base amount is required. |

A loss on the write down of obsolete inventory should be reported as | "other expenses and losses." |

In performing a vertical analysis, the base for cost of goods sold is | net sales. |

Profit margin is calculated by dividing | net income by net sales. |

Each of the following is included in computing the acid-test ratio except | inventory. |

The discontinued operations section of the income statement refers to | the disposal of a significant segment of a business. |

The current ratio may also be referred to as the | working capital ratio. |

A general rule to use in assessing the average collection period is that | it should not greatly exceed the credit term period. |

In performing a vertical analysis, the base for sales revenues on the income statement is | net sales. |

A weakness of the current ratio is | that it doesn't take into account the composition of the current assets. |

long-term

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