Question 1

What is the primary thing the inventory turnover ratio says about a business?
How profitable it is
How risky it is
How much inventory it has
How much average inventory it has
How often new merchandise replaces old merchandise

Accepted Answer

The answer of What is the primary thing the inventory...

Question 2

A(n) _____ ratio evaluates management's use of assets.
financial
solvency
activity
profitability
liability

Accepted Answer

The answer of A(n) _____ ratio evaluates management's use of...

Question 3

How is the return on equity ratio calculated?
Operation income divided by retained earnings
Net income divided by retained earnings
Net income divided by total owners' equity
Operating income divided by total owners' equity
Net income divided by common stock

Accepted Answer

The answer of How is the return on equity ratio...

Question 4

Firm A enjoys a better activity ratio than Firm B. What might this mean?
Firm A likely generates greater profits or sales.
Firm A uses its resources more efficiently than Firm B.
Firm A has more customers than Firm B.
Firm A generates greater profits on sales and uses its resources more efficiently than B.
It might not mean anything.

Accepted Answer

The answer of Firm A enjoys a better activity ratio...

Question 5

Jack wants to compare Algoma Steel and Defasco's earnings per share. Which formula would Jack use?
Net income divided by the market value of the common shares.
Net income divided by the market value of the preferred shares.
Total assets divided by number of common and preferred shares outstanding.
Total assets divided by value of common shares outstanding.
Net income divided by number of common shares outstanding.

Accepted Answer

The answer of Jack wants to compare Algoma Steel and...

Question 6

The inventory turnover ratio is calculated by
dividing cost of goods sold by revenues.
dividing average inventory by cost of goods sold.
dividing revenues by cost of goods sold.
dividing cost of goods sold by average inventory.
dividing revenues by average inventory.

Accepted Answer

The answer of The inventory turnover ratio is calculated by
dividing...

Question 7

A(n) _____ ratio estimates the risk associated with investing in a firm.
financial
solvency
managerial
activity
none of these

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The answer of A(n) _____ ratio estimates the risk associated...

Question 8

Which of the following is the most commonly used liquidity ratio?
Return on equity
Return on sales
Current ratio
Quick ratio
They are all equally used

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The answer of Which of the following is the most...

Question 9

The debt-to-equity ratio is calculated by dividing
current liabilities by owners' equity.
total liabilities by owners' equity.
long-term liabilities by retained earnings.
total liabilities by retained earnings.
long-term liabilities by owners' equity.

Accepted Answer

The answer of The debt-to-equity ratio is calculated by dividing
current...

Question 10

What does return on equity measure?
The amount of pre-tax profit earned for each dollar invested
The amount of profit earned for each share of stock
The amount of profit earned for each dollar of previous profit retained in the business
The amount of profit earned for each dollar invested
The amount of pre-tax profit earned for each share of stock

Accepted Answer

The answer of What does return on equity measure?
The amount...

Question 11

Julie, a recent college graduate, is interested in business and is considering pursuing a career in accounting. Her parents are supportive, with her mother recommending that Julie become a public accountant and her father recommending that she become a private accountant.
Which of the following, if true, supports the mother's position?
Julie has said that she wants to work for one of the accounting services firms like Ernst & Young.
The demand for government accountants is expected to grow in the near future.
Two other recent grads in Julie's class chose to pursue public accounting.
A recent survey showed that about 45 percent of new accountants chose public accounting.
Julie has said that she wants to work as an in-house accountant for a large public interest group like Sierra Club or Greenpeace.

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The answer of Julie, a recent college graduate, is interested...

Question 12

Which of the following is correct with respect to accounting ethics?
It is difficult for one person to make a difference; rather, what is required is organization-wide action to ensure ethical accounting behaviour.
The ultimate purpose of strong ethical standards in accounting is to maintain public confidence in business institutions and financial markets.
The U.S. CPA Code of Ethics does not address the conflict of interest problem.
To date, there has been no legislation passed in either the U.S. or Canada which is designed to ensure that the general public has confidence in the work of accountants.
All of these are correct.

Accepted Answer

The answer of Which of the following is correct with...

Question 13

What is the purpose of computing the earnings per share ratio?
To determine which firm gets the most out of its resources
To determine the net profit margin
To measure a firm's ability to meet its current liabilities
To attract investors
To measure the net income earned by a business for each dollar invested

Accepted Answer

The answer of What is the purpose of computing the...

Question 14

What is the purpose of computing profitability ratios?
To determine liquidity
To determine the most efficient use of resources
To determine the liquidity of the firm
To determine the potential risk of business activity
To determine the potential returns investors can expect

Accepted Answer

The answer of What is the purpose of computing profitability...

Question 15

Don wants to compute the earnings per share for SFX Ltd. How does he do it?
Divide sales by the number of common shares outstanding
Divide cost of goods sold by the number of common shares
Divide net income by the number of common shares outstanding
Divide cost of goods sold by average inventory
Divide net income by sales

Accepted Answer

The answer of Don wants to compute the earnings per...

Question 16

________ ratios give investors an idea of what returns they can expect on their investment; dividing ________ by total owners' equity is one such ratio.
Profitability; earnings per share
Long-term liquidity; net income
Activity; average inventory
Short-term liquidity; earnings per share
Profitability; net income

Accepted Answer

The answer of ________ ratios give investors an idea of...

Question 17

An activity ratio measures a firm's
sales per employee.
frequency of purchases.
level of inventory.
efficiency in using its assets.
sales per selling expense dollar.

Accepted Answer

The answer of An activity ratio measures a firm's
sales per...

Question 18

ABC Company has net income of $5 million, $40 million of assets, and $10 million of liabilities. The number of outstanding shares of stock is 3 870 000 shares. What are earnings per share?
$1.29
$0.77
$2.35
$7.75
Earnings per share cannot be computed with the information provided

Accepted Answer

The answer of ABC Company has net income of $5...

Question 19

Historically, it was thought that the current ratio should be _________, but more recently, many firms that are financially strong operate with current ratios of ___________.
at least 10:1; less than 5:0
more than 7:1; 2.0
less than 5:1; more than 10:1
2:1; less than 2:1
3:1; less than 5:1

Accepted Answer

The answer of Historically, it was thought that the current...

Question 20

_________ is the ability of a firm to finance an investment through borrowed funds.
Liquidity
Leverage
Solvency
Profitability
Activity

Accepted Answer

The answer of _________ is the ability of a firm...

Quiz 11: Understanding Accounting

What is the primary thing the inventory turnover ratio says about a business? How profitable it is How risky it is How much inventory it has How much average inventory it has How often new merchandise replaces old merchandise

A(n) _____ ratio evaluates management's use of assets. financial solvency activity profitability liability

How is the return on equity ratio calculated? Operation income divided by retained earnings Net income divided by retained earnings Net income divided by total owners' equity Operating income divided by total owners' equity Net income divided by common stock

The inventory turnover ratio is calculated by dividing cost of goods sold by revenues. dividing average inventory by cost of goods sold. dividing revenues by cost of goods sold. dividing cost of goods sold by average inventory. dividing revenues by average inventory.

A(n) _____ ratio estimates the risk associated with investing in a firm. financial solvency managerial activity none of these

Which of the following is the most commonly used liquidity ratio? Return on equity Return on sales Current ratio Quick ratio They are all equally used

The debt-to-equity ratio is calculated by dividing current liabilities by owners' equity. total liabilities by owners' equity. long-term liabilities by retained earnings. total liabilities by retained earnings. long-term liabilities by owners' equity.

What is the purpose of computing profitability ratios? To determine liquidity To determine the most efficient use of resources To determine the liquidity of the firm To determine the potential risk of business activity To determine the potential returns investors can expect

ratios give investors an idea of what returns they can expect on their investment; dividing by total owners' equity is one such ratio. Profitability; earnings per share Long-term liquidity; net income Activity; average inventory Short-term liquidity; earnings per share Profitability; net income

An activity ratio measures a firm's sales per employee. frequency of purchases. level of inventory. efficiency in using its assets. sales per selling expense dollar.

ABC Company has net income of $5 million, $40 million of assets, and $10 million of liabilities. The number of outstanding shares of stock is 3 870 000 shares. What are earnings per share? $1.29 $0.77 $2.35 $7.75 Earnings per share cannot be computed with the information provided

Historically, it was thought that the current ratio should be _, but more recently, many firms that are financially strong operate with current ratios of ___. at least 10:1; less than 5:0 more than 7:1; 2.0 less than 5:1; more than 10:1 2:1; less than 2:1 3:1; less than 5:1

_________ is the ability of a firm to finance an investment through borrowed funds. Liquidity Leverage Solvency Profitability Activity