1. Making Moves has the following data available. Sales $800 000 Selling expenses 160 000 Profit 320 000 Using vertical analysis, express selling expenses as a percentage of the base amount.

a. 60% b. 50% c. 20% d. 15%

2. How many of these ratios measure the adequacy of profits? Profit before interest and finance costs/ finance costs Profit compared to total assets Profit compared to sales Profit compared to equity

a. 1 b. 2 c. 3 d. 4

3. Financial ratios are used for all of the following purposes except:

a. by taxation authorities to determine the amount of tax payable. b. by shareholders to assess profitability. c. by creditors to monitor liquidity. d. by management for planning and control.

4. If an entity is able to earn more on borrowings than the cost of those borrowings the return on equity will:

a. increase. b. decrease. c. be unchanged. d. vary.

5. Profit before finance costs is used in calculating return on total assets because:

a. the efficient use of resources should be examined independently of the method of financing. b. it is simpler to calculate than profit after deducting finance costs. c. interest rates are hard to predict. d. interest is a tax deduction for a company.