24 Chapter 15 TRUE/FALSE Instructions: Indicate whother each of the following statements is true or tte True False by placing a cheak mark in the appropriate column. In horizontal analysis of the income statement, each item is stated as a percentage of total sales ana . 1. 2. Solvency is the ability of a business pay its debts as they come due. 3. The ratio of net sales to assets provides a solvency measure that shows the margin of safety of the 4. The quick ratio or acid-test ratio is the ratio of the sum of cash, receivables, and marketable securities to current Nabilities. 5 Net sales divided by the year-end net accounts receivable gives the accounts receivable turnover 6. Net income minus the amount required for preferred dvidends divided by the average common stockholders equity gives the rate earned on common stockholders equity The rate earned on total assets is calculated by subtracting interest expense from net income and dividing this sum by the average total assets 7. 8. The tendency on the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is referred to as financial leverage. A profitability measure that shows the rate of return to common stockholders in terms of cash dividends is known as the dividend yield on common stock...............................- 9. 10. The excess of the current assets of an enterprise over its current liabilities and stockholders' equity is called working capital