5. This ratio tells whether the company's inventory is too high ar th low. It tells you how many was sold and enables you to compare stock inventories of the contary with that of other companies in the same industry. a. Inventory divided by total assets b. Quick assets divided by current liabilities c. Cost of goods sold and expenses divided by current assete d. Cost of goods sold divided by net sales d. Cost of sales divided-by average inventory 7. If current assets exceed current liabilities, payments to creditors ande on the last day of the month will a. Decrease current ratio. b. Increase current ratio. c. Decrease net working capital. d. Increase net working capital. 8. Which of the following ratios measures short-term solvency? a. Current ratio b. Age of receivables c. Creditors' equity to total assets d. Return on investment 9. A company has a current ratio of 2 to 1 . This ratio will decrease if the company a. Receives a \5 stock dividend on one of its marketable securities. b. Pays a large account payable which had been a current liability. c. Borrows cash on a six-month note. d. Solls merchandise for more than cost and records the sale using the perpetusi-inventory method. 10. How are each of the following used in the calculation of the receivable turnover? a. Cash sales b. Nol used c. Nut used d. Denominator Credit sales Numerator Denominator Numerator Denominator Choose the letter that corresponds to the BEST answer. 1. Which of the following should not be included as an application of the rate of return concept? a. rate of return messures the overall profitability of the cospany b. rate of return can be used in planning and controlling busineas operations c. rate of return may be used to arrive at selling prices of the product 1 ines d. rate of return may be used in planning the asset and equity structure of the firm e. answer not given. 2. Financial statements wich are reduced to simpler terme by expressing peso amounts in even thousands or by reducing peso anounts to percentages so that the relative importance of each individual account or classification to the total will stand out are called a. Unconverted statements b. Common size statements c. Statement of cesh receipts and disbursenents d. Cash-flow analysis e. Working capital analysis 3. It is the difference between current assets and current liabilities or that portion of total current assets that has been supplied by longtern liabilities and omers. It indicates the capability of a business to meet current liabilities and current operations in the future. a. Norking capital d. Return on capital b. Net. working capital o. Fixad assets c. Profit margin 4. This tells you what part of each peso of sales the company retained as profit. It is a very handy guide in comparing the earnings of this year with previous years to determine the earnings trend of the company. It is also very valuable in comparing earnings of the company with that of other companies in the same industry. a. Yield on investment b. Eurnings per share of stock c. Margin of profit d. Inventory turnover e. Return on total assets 12. How are Jividends per share for comon stock used in the calculation of the following? Esenings per share geyout ratio a. Denominator b. Denominator c. Numerator d. Numerator per share Denominator Not used Not used Numerator 13. Which of the following is an appropriate computation for return on investment? a. Income divided by total assets b. Income divided by sales c. Sales divided by total assets d. Sales divided by stockholders' equity 14. Which of the following should be included in the computation of total quick assets? a. Nerketable securities b. Cash c. Trade receivables d. All of the above e. None of the above 15. Which of the following statements is false? 8. Current ratio indicates the ability to pay current debts from current assets b. Dividend payout indicates the proportion of earnings distributed as dividends c. Debt ratio indicates the proportion of total assets provided by debtors d. All of the above e. None of the above 16. In comparing the current ratio of two companies, hy is it invalid to assume that the company with the higher current ratio is the better coepany? a. The current ratio includes assets other than cash. b. A higher current ratio may indicate inadequate inventory on hand. c. A high current ratio indicate inefficient use of various ssets and liabilities. d. The two companies define working capital in different terns. 17. A useful tool in financial statement analysis is terned \"comon size financial statements.\" that does this tool enable the financial analyst to do? a. Evaluate financial statements of companies within a given b. induatry of the same approximate sales value. Determine hich companies in a similar industry are at c. Caproximately the sane of development. expenses the mix of assets, liabilities, capital, revenue, and companies within a company over a period of time or between aize. d. Ancertain the relative polential of companies of similar size in different industries