MGT203 Midterm Exam Part 1

If the debt ratio is 10%, the equity ratio is 90%.

• TRUE

• FALSE

If the equity ratio is 10%, the equity multiplier is 10.

• TRUE

• FALSE

The assets turnover ratio is computed by dividing assets by sales.

• TRUE

• FALSE

Prepayment or prepaid expense is a quick asset.

• TRUE

• FALSE

Prepayment or prepaid expense is a current asset.

• TRUE

• FALSE

Common-size statements are financial statements of companies of similar size.

• TRUE

• FALSE

One limitation of vertical analysis is that it cannot be used to compare two companies that are significantly different in size.

• TRUE

• FALSE

The gross margin percentage is computed by dividing the gross margin by total assets.

• TRUE

• FALSE

Total equity plus total liabilities equal total assets.

• TRUE

• FALSE

If a company's acid-test ratio increases, its current ratio will also increase.

• TRUE

• FALSE