# long-term creditors are usually most interested in evaluating

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Which of the following is not a profitability ratio?Times interest earned
Long-term creditors are usually most interested in evaluatingprofitability and solvency.
In performing a vertical analysis, the base for sales returns and allowances isnet sales.
Inventory turnover is calculated by dividingcost of goods sold by the average inventory.
Horizontal analysis evaluates financial statement dataover a period of time.
In vertical analysis, the base amount for each income statement item isnet sales.
Horizontal analysis evaluates a series of financial statement data over a period of timeto determine the amount and/or percentage increase or decrease that has taken place.
The disposal of a significant component of a business is calleddiscontinued operations.
Earnings per share is calculatedonly for common stock.
Trading on the equity (leverage) refers to theuse of borrowed money to increase the return to owners.
Asset turnover measureshow 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 alwaysdecrease
Each of the following is an extraordinary item except thelosses attributable to labor strikes.
In ratio analysis, the ratios are never expressed as anegative figure.
In performing a vertical analysis, the base for prepaid expenses istotal assets.
The ratios that are used to determine a company's short-term debt paying ability arecurrent ratio, acid-test ratio, receivables turnover, and inventory turnover.
A liquidity ratio measures theshort-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 calledintracompany 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 generallynet sales.
The ratio that uses weighted average common shares outstanding in the denominator is theearnings per share.
The debt to total assets ratiois a solvency ratio.
Ratios that measure the short-term ability of the company to pay its maturing obligations areliquidity ratios.
A successful grocery store would probably havea high inventory turnover.
The acid-test (quick) ratiorelates cash, short-term investments, and net receivables to current liabilities.
Comparative balance sheets are usually prepared fortwo years.
Stockholders are most interested in evaluatingprofitability and solvency.
Vertical analysis is a technique which expresses each item within a financial statementin terms of a percent of a base amount.
Each of the following is a liquidity ratio except thedebt to total assets ratio.
An extraordinary item is one thatoccurs 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 evaluatingliquidity
Ratios are used as tools in financial analysisB. because they may provide information that is not apparent from inspection of the individual components of the ratio.
The current ratio isused 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'scurrent 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 thepayout ratio.
When there has been a change in accounting principle,the change should be reported retroactively.
In analyzing financial statements, horizontal analysis is atool.
The formula for horizontal analysis of changes since the base period is the current year amountminus the base year amount divided by the base year amount.
The acid-test ratiodoes not include inventory as part of the numerator.
A measure of the percentage of each dollar of sales that results in net income isprofit margin.
If an item meets one (but not both) of the criteria for an extraordinary item, itis 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 statementsis 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 isnet sales.
Profit margin is calculated by dividingnet income by net sales.
Each of the following is included in computing the acid-test ratio exceptinventory.
The discontinued operations section of the income statement refers tothe disposal of a significant segment of a business.
The current ratio may also be referred to as theworking capital ratio.
A general rule to use in assessing the average collection period is thatit should not greatly exceed the credit term period.
In performing a vertical analysis, the base for sales revenues on the income statement isnet sales.
A weakness of the current ratio isthat it doesn't take into account the composition of the current assets.
long-term
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