1. When a capital items depreciation is changed from three years to five years, it means:

1. The accumulated depreciation will be lower on the income statement
2. Bottom line profitability goes up this year
3. That capital item was more expensive than originally anticipated
4. Bottom line profitability goes down

2. It is important to understand return on assets because:

1. It reflects a companys ability to pay off debt
2. It is an indication of how many assets a company is using
3. It is a measure of the return on investors investments
4. It helps to increase revenue

3. What does a companys balance sheet show:

1. A snapshot of the firms assets, liability and owners equity.
2. Revenues, expenses and profitability
3. Increases or decreases in the companys cash during a particular year.
4. None of the above.

4. Which of the following is a profitability ratio:

1. Inventory turnoveror cost of goods sold divided by average inventory
2. Debt ratioor total debt divided by total assets
3. Return on assetsor net income divided by total assets
4. Average days salesor net sales divided by 365

5. Which of the following type of business entity accounts for the majority of sales in the United States?

1. Sole proprietorships
2. C Corporations
3. Partnerships
4. S Corporations