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Various financial ratios, including return ratios, are categorized as ____________________ ratios.

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An analysis in which all the components of an income statement are expressed as a percentage of net sales is called:


A) vertical analysis.
B) horizontal analysis.
C) liquidity analysis.
D) common-size analysis.

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

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Which one of the following is not a characteristic generally evaluated in ratio analysis?


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

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

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Britt Company Selected data from Britt Company's financial statements are provided below. Britt Company Selected data from Britt Company's financial statements are provided below. - Refer to the selected financial data for Britt Company. Assume that competitors in Britt's industry have an average inventory turnover ratio of 20.8 times in 2012. Britt's inventory turnover ratio for 2012 indicates that the company: A) has too little inventory on hand at the end of 2012. B) is pricing its products too low. C) is selling its inventory much more quickly than the industry average. D) may have problems with generating sales. - Refer to the selected financial data for Britt Company. Assume that competitors in Britt's industry have an average inventory turnover ratio of 20.8 times in 2012. Britt's inventory turnover ratio for 2012 indicates that the company:


A) has too little inventory on hand at the end of 2012.
B) is pricing its products too low.
C) is selling its inventory much more quickly than the industry average.
D) may have problems with generating sales.

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

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Horizontal analysis of comparative financial statements includes the:


A) development of common-size statements.
B) calculation of liquidity ratios.
C) calculation of dollar amount changes and percentage changes from the previous to the current year.
D) evaluation of financial statement data.

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

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Which of the following statements is true regarding horizontal analysis?


A) It can only be used with balance sheet accounts.
B) It can only be used with income statement accounts.
C) It expresses each financial statement line item as a percent of the largest amount on the statement.
D) It expresses each financial statement line item as a percent of the earliest year amount.

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

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What type of analysis is indicated by the following? What type of analysis is indicated by the following? A) Vertical analysis B) Horizontal analysis C) Liquidity analysis D) Common-size analysis


A) Vertical analysis
B) Horizontal analysis
C) Liquidity analysis
D) Common-size analysis

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

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Which of the following ratios is most useful in indicating a company's profitability?


A) Operating cash flow ratio
B) Profit margin ratio
C) Dividend payout ratio
D) Dividend yield ratio

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

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Bathing Beauties Swimwear Company (BBSC) is a retailer of specialty swimwear. During 2012, BBSC expanded its retail business by adding 30 new retail stores. The following information is obtained from the comparative financial statements included in the company's 2012 Form 10-K (all amounts are in $ thousands). Bathing Beauties Swimwear Company (BBSC) is a retailer of specialty swimwear. During 2012, BBSC expanded its retail business by adding 30 new retail stores. The following information is obtained from the comparative financial statements included in the company's 2012 Form 10-K (all amounts are in $ thousands). Using the information provided, address the following questions for each fiscal year-end: Using the information provided, address the following questions for each fiscal year-end: Bathing Beauties Swimwear Company (BBSC) is a retailer of specialty swimwear. During 2012, BBSC expanded its retail business by adding 30 new retail stores. The following information is obtained from the comparative financial statements included in the company's 2012 Form 10-K (all amounts are in $ thousands). Using the information provided, address the following questions for each fiscal year-end:

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Percentage analyses, ratios, turnovers, and other measures of financial position and operating results are:


A) a substitute for sound judgment.
B) useful analytical measures.
C) enough information for analysis, industry information is not needed.
D) unnecessary for analysis, but reaction is better.

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

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A company's relative mix of debt and equity financing is referred to as its ____________________.

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The inventory turnover ratio is represented by which of the following formulas?


A) Net credit sales / Average inventory
B) Average inventory / Net credit sales
C) Cost of goods sold / Average inventory
D) Average inventory / Cost of goods sold

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

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In ____________________ analysis, each financial statement line item is expressed as a percent of the largest amount on the statement, which is net sales or total assets for the income statement or balance sheet, respectively.

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The following information is available for Gomez Company.: The following information is available for Gomez Company.: Which of the following statements is correct? A) The price to earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of 2011. B) The price to earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amount of earnings per share at the end of 2011. C) The price to earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of 2011. D) The market price per share and the earnings per share are not statistically related to each other. Which of the following statements is correct?


A) The price to earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of 2011.
B) The price to earnings ratio is 5.0% and a share of common stock was selling for 5.0% more than the amount of earnings per share at the end of 2011.
C) The price to earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of 2011.
D) The market price per share and the earnings per share are not statistically related to each other.

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

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Inventory turned over seven times during the year at Prosser Electronics. Similar electronics retailers have an inventory turnover equal to twelve times per year. What explains Prosser's state of inventory management?


A) Prosser sold too much inventory during the year.
B) Prosser needs to increase sales and decrease the amount of inventory on hand.
C) Prosser is performing much better than its competitors.
D) Prosser should increase the amount of goods on hand to accommodate the growth in inventory demand.

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

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____________________ refers to the likelihood that a company will be able to pay its current obligations as they come due.

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Emerald Company issued additional shares of stock. Which of the following is true with regard to the effect of the stock issuance transaction on Emerald's ratio computations?


A) Earnings per share decreases
B) The debt to equity ratio increases
C) The asset turnover ratio increases
D) Return on equity remained unchanged

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

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Bloom's Garden Center Company Selected data from the financial statements of Bloom's Garden Center Company are provided below. Bloom's Garden Center Company Selected data from the financial statements of Bloom's Garden Center Company are provided below. - Refer to the selected data provided for Bloom's Garden Center Company. Which of the following would result from a horizontal analysis of Bloom's balance sheet? A) Accounts receivable increased by $23,000 or 47.92% during 2012. B) Accounts receivable is five times larger than inventory in 2012. C) Accounts receivable is 13.39% of total assets in 2012. D) The accounts receivable turnover ratio is 7.56 in 2012. - Refer to the selected data provided for Bloom's Garden Center Company. Which of the following would result from a horizontal analysis of Bloom's balance sheet?


A) Accounts receivable increased by $23,000 or 47.92% during 2012.
B) Accounts receivable is five times larger than inventory in 2012.
C) Accounts receivable is 13.39% of total assets in 2012.
D) The accounts receivable turnover ratio is 7.56 in 2012.

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

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The following information pertains to Raleigh Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets The following information pertains to Raleigh Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets - What is the earnings per share on common stock? A) $9.38 B) $8.38 C) $1.00 D) $5.00 - What is the earnings per share on common stock?


A) $9.38
B) $8.38
C) $1.00
D) $5.00

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

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Airport Gift Mart, Inc. reported the following amounts in its financial statements: Airport Gift Mart, Inc. reported the following amounts in its financial statements: From 2011 to 2012, the company's efficiency in managing inventory is: A) declining, because the inventory turnover ratio is decreasing. B) improving, because the inventory turnover ratio is increasing. C) declining, because the inventory turnover ratio is increasing. D) improving, because the inventory turnover ratio is decreasing. From 2011 to 2012, the company's efficiency in managing inventory is:


A) declining, because the inventory turnover ratio is decreasing.
B) improving, because the inventory turnover ratio is increasing.
C) declining, because the inventory turnover ratio is increasing.
D) improving, because the inventory turnover ratio is decreasing.

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

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