The current ratio is a measure of all the ratios calculated for the current year.

A) True B) False

2.

In the vertical analysis of the income statement, each item is generally stated as a percentage of net income.

A) True B) False

3.

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

A) True B) False

4.

Another name for trend analysis is horizontal analysis.

A) True B) False

5.

Each of the following is a liquidity ratio except the

A) acid-test ratio. B) current ratio. C) debt to assets ratio. D) inventory turnover.

6.

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.

7.

Stockholders are most interested in evaluating

A) liquidity and solvency. B) profitability and solvency. C) liquidity and profitability. D) marketability and solvency.

8.

The ratios that are used to determine a company's short-term debt paying ability are

A) asset turnover, times interest earned, current ratio, and accounts receivable turnover. B) times interest earned, inventory turnover, current ratio, and accounts receivable turnover. C) times interest earned, acid-test ratio, current ratio, and inventory turnover. D) current ratio, acid-test ratio, accounts receivable turnover, and inventory turnover.

9.

In performing a vertical analysis, the base for prepaid expenses is

A) total current assets. B) total assets. C) total liabilities and stockholders' equity. D) prepaid expenses.

10.

Vertical analysis is also called

A) common size analysis. B) horizontal analysis. C) ratio analysis. D) trend analysis.