The purpose of an audit is to: 

a. determine whether or not a company has a good credit risk. 

b. render an opinion on the fairness of the statements. 

c. determine whether or not a company complies with income tax regulations. 

d. determine whether or not a company is a good investment. 

Profitability refers to the ability of the business to: 

a. manage its accounts receivable and inventory. 

b. earn a reasonable amount of income. 

c. provide owners with dividends. 

d. pay its current and noncurrent liabilities. 

Which of the following is an analysis used in assessing solvency? 

a. Fixed assets turnover 

b. P/E ratio 

c. Accounts receivable analysis 

d. Earning per share 

For most profitable companies, the rate earned on total assets will be less than: 

a. the rate earned on stockholders’ equity. 

b. the rate earned on total liabilities and stockholders' equity. 

c. the rate earned on sales. 

d. cannot be determined without more information. 

Which one of the following is not a characteristic generally evaluated in ratio analysis? 

a. Liquidity 

b. Marketability 

c. Solvency 

d. Profitability