37. The debt to assets ratio measures A) the company's profitability. B) whether interest can be paid on debt in the current year. C) the proportion of interest paid relative to dividends paid. D) the percentage of the total assets provided by creditors. be paid on de D) the portion of - 38. In vertical analysis, the base amount for each income statement item is A) gross profit. B) net income. C) net sales. D) sales. - 39. Assume the following cost of goods sold data for a company 2016 $1,704,000 2015 1,400,000 2014 1,200,000 If 2014 is the base year, what is the percentage increase in cost of goods sold from 2014 to 2016? A) 70.4% B) 42% C) 85.7% D) 117% 40. Ratios that measure the short-term ability of the company to pay its maturing obligations are A) liquidity ratios. B) profitability ratios. C) solvency ratios. D) trend ratios. __41. In analyzing financial statements, horizontal analysis is a A) requirement. B) tool. C) principle. D) theory. 42. Asset turnover measures A) how often a company replaces its assets. B) how efficiently a company uses its assets to generate sales. C) the portion of the assets that have been financed by creditors. D) the overall rate of return on assets. 43. Ratios are used as tools in financial analysis A) instead of horizontal and vertical analyses. B) because they may provide information that is not apparent from inspection of the individual components of the ratio. C) because even single ratios by themselves are quite meaningful. D) because they are prescribed by GAAP. 44. A supplier to a company would be most interested in the company's A) asset turnover. B) profit margin. C) current ratio. D) earnings per share. 45. The following amounts were taken from the financial statements of Leaf Company 2015 2014 Total assets $900,000 $1,000,000 Net sales 840,000 650,000 Gross profit 352,000 320,000 Net income 138,600 117,000 Weighted average number of common shares outstanding 90,000 90,000 Market price of common stock $35 $39 The profit margin ratio for 2015 is A) 15.4%. B) 44.9%. C) 16.5%. D) 10.7%. - 46. Trading on the equity leverage) refers to the A) amount of working capital. B) amount of capital provided by owners. C) use of borrowed money to increase the return to owners. D) number of times interest is earned. _47. Profit margin is calculated by dividing A) sales by cost of goods sold. B) gross profit by net sales. C) net income by stockholders' equity. D) net income by net sales. 48. Ale Corporation had net income of $240,000 and paid dividends to common stockholders of $40,000 in 2014. The weighted average number of shares outstanding in 2014 was 60,000 shares. Ale Corporation's common stock is selling for $60 per share on the New York Stock Exchange. Ale Corporation's payout ratio for 2014 is A) $0.71 per share. B) 25%. C) 16.7%. D) 8%. 49. The following financial statement information is available for James Corporation: 2015 2014 Net sales $780,000 $697,000 Cost of goods sold 406,000 377,000 Net income 120,000 80,000 Tax expense 48,000 29,000 Interest expense 14,000 14,000 The profit margin ratio for 2015 is A) 15.4%. B) 47.9%. C) 32.1%. D) 13.5%. 50. Under IFRS, the components of other comprehensive income can be reported in each of the following ways except A) the one-statement approach. B) the two-statement approach. C) the statement of stockholders' equity approach. D) All of these answer choices are correct