1.Common-size statements focus on companies of similar size and operations. False orTrue

2.The acid test ratio excludes inventories from current assets. True of False

3.Lisa Inc.'s balance sheet appears below: Lisa Inc. Balance Sheet December 31, 20X7 and 20X6 (in thousands of dollars)

	20X7	20X6
Cash	$30	$25
Marketable securities	20	15
Accounts receivable (net)	45	30
Inventories	60	50
Prepaid expenses	15	20
Total current assets	170	140
Land	155	125
Building (net)	80	90
Equipment (net)	95	100
Total long-term assets	330	315
Total Assets	$500	$455
Accounts payable	$47	$28
Accrued interest	15	15
Short-term notes payable	23	12
Total current liabilities	85	55
Long-term notes payable	10	10
Bonds payable	15	15
Total long-term liabilities	25	25
Total liabilities	110	80
Preferred shares ($100 par value, 5%)	100	100
Common shares ($10 par value)	150	150
Additional paid-in capital--common shares	75	75
Retained earnings	65	50
Total shareholders' equity	390	375
Total liabilities & equity	$500	$455

The company's sales for the year were $300,000, its cost of goods sold was $220,000, and its net income was $35,000. All sales were on credit. Preferred dividends for the year were $5,000. Lisa Inc.'s return on common shareholders' equity for 20 7 was closest to:

Multiple Choice

7.8%.

10.6%.

10.9%.

12.4%.

4.