Accounting Chapter 17

Front

Is a company having earnings per share of $5.67 more profitable than a company having earnings per share of $4.32?

Back

False

Front

A company has set its gross margin benchmark at 40% to 42%. An increase in the ratio from 38% to 39% is a positive trend.

Back

True

Front

An accounts receivable ratio above the target range may indicate that Three Green is too liberal in extending credit to its customers.

Back

True

Front

Investors are willing to pay a higher P/E ratio for growth stocks than for income stocks.

Back

True

Front

Managers who want to control operating expenses will be more interested in the operating margin than the total operating expense ratio.

Back

False

Front

The ratio that measures the relationship between cash and current assets is the quick ratio.

Back

False

Front

Modifying a benchmark is an option for a business that fails to achieve its benchmark.

Back

True

Front

The gross profit margin gives investors the best indication of how effectively a business is earning a profit from its normal business operations.

Back

False

Front

Alpha Company’s benchmark total operating expense ratio is between 32.0% and 34.0%. A decline in its operating expense ratio from 33.1% to 32.2% is a favorable trend.

Back

False

Front

A business with operating expenses that exceed its benchmark should always begin by reducing the number of employees, the largest operating expense for most businesses.

Back

False