1.What is the most informative section of a common-size balance sheet?

A. taxes

B. assets

C. revenues

D. liabilities

2. How is a return on sales ratio derived?

A. a company's sales for the year divided by net income.

B. a company's sales for the year minus the cost of goods sold.

C. a company's net income divided by sales for the year.

D. a company's owner equity divided by sales for the year.

3. How is share price of a stock-exchange-listed corporation estimated using the earnings multiple?

A. estimated earning times P/E ratio

B. price per share times outstanding shares

C. earnings per share divided by P/E ratio

D. earnings per share times P/E ratio

4. Why should you use a price multiple whenever possible rather than a discounted cash flows analysis?

A. interest rates are not considered in DCF analysis.

B. Future interest rates cannot be calculated.

C. DCF analyses are sensitive to assumptions.

D. DCF analyses cannot be made beyond five years.

5. How is EPS calculated?

A. by dividing net income for the current period by the number of outstanding shares of stock.

B. by dividing the number of outstanding shares of stock by the net income for the current period.

C. by the cost incurred in normal business operations to generate revenue.

D. by the net amount of assets generated by a business through business operations.

6. Assets are correctly defined as _____.

A. items that will probably provide a future benefit to the company as result of a past transaction.

B. item that are purchased on an ongoing basis by a company.

C. items that are obligated to repay money or to provide a service in the future.

D. items listed in the accounting equation as embodied in a company's balance sheet.