1. The price-earnings ratio measures the premium investors are willing to pay for a company's stock relative to its earnings.

True False

2.The best reason to use a common-size analysis is to assess nonfinancial measures of performance.

True False

3.On a common-size balance sheet, equipment should be stated as a percentage of total assets.

True False

4.On a common-size income statement, net income should be stated as a percentage of gross margin.

True False

5.All of the following are nonfinancial measures that might be used by transportation companies such as FedEx:

a. percentage of damage-free goods.

b. percentage of on-time deliveries.

c. average collection period.

d. hours of employee training.

True False

6.All of the following measures focus on short-term liquidity:

a. current ratio.

b. debt to assets ratio.

c. quick ratio.

d. receivables turnover ratio.

True False

7.Savanah Company reported the following amounts of net income.

Year 1

$49,187

Year 2

$52,553

Year 3

$52,061

What is the percentage change in net income from Year 2 to Year 3? Answer to nearest two decimal places without any commas or words (e.g. 1.25 not 1.25 increase or 125%). Enter a negative number as -10 not (10).

8.Dresden Inc. has net sales of $120,947, cost of goods sold of $89,992, operating expenses of $22,842, interest expense of $3,252, and income tax expense of $1,052. The company's gross margin ratio is Answer to nearest two decimal places without any commas or words (e.g. 1.25 not 1.25 increase or 125%). Enter a negative number as -10 not (10).

9. Filmore Inc. has the following information available for 2012 and 2013:

2012 2013

Current liabilities $250,000 $400,000

If you were performing a trend analysis on this information, you would say that current liabilities have increased by 62.5%.

True False

10.Companies with higher inventory turnover ratios tend to have lower inventory costs, including lower inventory storage and insurance costs, than companies with lower inventory turnover ratios.

True False