1. Which of the following descriptions is wrong about ratios and ratio analysis?

Some ratios can indicate whether the company has enough resources on hand to pay its immediate debt.

Certain ratios can indicate the companys ability to handle its long-term debt using its entire resources.

ROS can provide information about how effectively operating costs and expenses have been controlled in its operations.

Ratios are direct answers to the problems a company may face.

Business managers must learn to use ratios to identify real problems that may be presented by ratios.

2. Provide the formula of EPS (Earning per Share).

Revenues amount divided by the total number of common stocks outstanding

Total Owners Equity amount divided by the total number of common stocks outstanding

Net Income divided by the total number of common stocks outstanding

Retained Earnings divided by the total number of common stocks outstanding

3. You are a shareholder of a corporation. It has 50,000 shares of common stocks outstanding now. Its recent net profit was $100,000. The company intends to issue (sell) additional 10,000 shares of new common stocks at $100 per share. By selling them, the company can obtain $1,000,000 of cash for its new project. The project is expected to increase its net profit by $20,000 in the next year. The company needs your vote for this decision. What would be the ultimate criterion that you are using to make your decision for this vote?

The growth rate of the sales as the result of the new investment

The growth rate of net profit as the result of the new investment

The growth rate of the Earnings Per Share as the result of the investment

The growth rate of the Total Assets of the company as the result of the investment.

The growth rate of the Total Equity of the company as the result of the new investment.

4. One expense item of the HFT Corp. was $36,000 when the total revenues of $100,000 in one month. In another month, the same expense item was $32,400, when the total revenues were $90,000. What type of cost would this be?

a fixed cost item

a variable cost item

a mixed cost item

Let's ask an accountant.

5. Another expense item was 24% of the total revenues in one year when the revenues were $100,000. In the next year, the total revenues were $120,000, and the same expense item was 20% of the revenues. What type of cost would this be a fixed cost, a variable cost, or a mixed cost?

a fixed cost item

a variable cost item

a mixed cost item

Let's ask an accountant