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Exam 12: Financial Statement Analysis

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Question 71

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Return on assets equals:

A) Gross profit ratio x Inventory turnover.
B) Profit margin x Inventory turnover.
C) Gross profit ratio x Asset turnover.
D) Profit margin x Asset turnover.

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

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Question 72

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Which of the following ratios is most useful in evaluating liquidity?

A) Return on assets.
B) Return on equity.
C) Debt to equity ratio.
D) Current ratio.

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

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Question 73

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Growth stocks have high expectations of future earnings growth,and therefore,usually trade at higher PE ratios.

Return on assets is calculated as net income divided by ending total assets.

An extremely high inventory turnover ratio may be a signal that the company is losing sales due to inventory shortages.

Which of the following is a sign that a company can quickly turn its receivables into cash?

The sale or disposal of a significant component of a company's operations is referred to as:

Ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.

TPX Company's 2013 gross profit ratio is:

The financial statements of a firm that uses more aggressive accounting practices would be likely to report:

Asset turnover measures sales volume in relation to the investment in assets,and is calculated as net sales divided by average total assets.

Comparing changes in net income for one company over time is an example of:

TPX Company's 2013 profit margin is:

Define earnings persistence.How does earnings persistence relate to the reporting of discontinued operations and extraordinary items?

Vertical analysis expresses each item in a financial statement as a percentage of the same base amount.

Explain why ratios that compare an income statement account with a balance sheet account should express the balance sheet account as an average of the beginning and ending balances.