1. Given the following data: sales $1,500,000; gross profit $640,000; net income $40,000 and income tax expense $35,000. What is the common-size percentage for the cost of sales?

a. 3.0%

b.37.7%

c.42.7%

d.57.3%

2. Which of the following depicts the quick ratio?

a. (cash + accounts receivable + short-term investments) ÷ current liabilities

b. (cash + accounts receivable) ÷ total assets

c. (current assets – current liabilities) ÷ total assets

d. (cash + inventory) ÷ current liabilities

3. Analysts use financial statements for their analysis for all of the following reasons except

a. corporate performance.

b. employee satisfaction.

c. lending decisions.

d. risks related to the investment.

4. Which one of the following steps adds the most value to a financial statement analysis?

a. Determine the purpose of the analysis

b. Develop conclusions

c. Analyze and interpret the ratios

d. Prepare common-size analysis

5. Changes in the profit margin ratio could indicate changes in any of the following except changes in

a. sales volume.

b. product profitability.

c. the cost structure.

d. the pricing policy.