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WorksheetsAccounting Chapter 17
Total questions: 28
Worksheet time: 14mins
Name
Class
Date
1.
A company having earnings per share of $5.67 is more profitable than a company having earnings per share of $4.32.
a)
True
b)
False
2.
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.
a)
True
b)
False
3.
An accounts receivable ratio above the target range may indicate that Three Green is too liberal in extending credit to its customers.
a)
True
b)
False
4.
Investors are willing to pay a higher P/E ratio for growth stocks than for income stocks.
a)
True
b)
False
5.
Managers who want to control operating expenses will be more interested in the operating margin than the total operating expense ratio.
a)
True
b)
False
6.
The ratio that measures the relationship between cash and current assets is the quick ratio.
a)
True
b)
False
7.
Modifying a benchmark is an option for a business that fails to achieve its benchmark.
a)
True
b)
False
8.
The gross profit margin gives investors the best indication of how effectively a business is earning a profit from its normal business operations.
a)
True
b)
False
9.
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.
a)
True
b)
False
10.
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.
a)
True
b)
False
11.
A company has done everything possible to control rising merchandise costs.To maintain its gross margin, its only alternative is to increase sales.
a)
True
b)
False
12.
Income stocks typically have a higher dividend yield than growth stocks.
a)
True
b)
False
13.
Quick assets include cash and merchandise inventory.
a)
True
b)
False
14.
The gross profit ratio is also referred to as the gross margin.
a)
True
b)
False
15.
The dividend ratio is the most widely recognized measure of a corporation’s financial performance.
a)
True
b)
False
16.
A corporation should compare its working capital to industry standards.
a)
True
b)
False
17.
A corporation’s earnings per share can only be compared to its earnings per share during prior fiscal years.
a)
True
b)
False
18.
The current ratio assumes a business could sell its merchandise inventory quickly.
a)
True
b)
False
19.
Operating margin is also referred to as
a)
a. rate of return on sales.
b)
b. operating income.
c)
c. gross margin.
d)
d. earnings per share.
20.
The price-earnings ratio is an example of a
a)
a. solvency ratio.
b)
b. profitability ratio.
c)
c. liquidity ratio.
d)
d. market ratio.
21.
To rate the ability of a business to pay its current and long-term liabilities, investors use
a)
a. solvency ratios.
b)
b. profitability ratios.
c)
c. liquidity ratios.
d)
d. market ratios.
22.
Gross margin can be increased by
a)
a. selling more merchandise.
b)
b. buying less merchandise.
c)
c. increasing unit sales prices.
d)
d. reducing operating expenses.
23.
Vertical analysis ratios are an example of a
a)
a. solvency ratio.
b)
b. profitability ratio.
c)
c. liquidity ratio.
d)
d. market ratio.
24.
The least likely factor a business will use to determine a benchmark is
a)
a. government economic standards.
b)
b. actual ratios from the prior year.
c)
c. industry standards.
d)
d. its business plan.
25.
The ratio that gives the best indication of how effectively a business is earning a profit from its normal business operations is the
a)
a. debt ratio.
b)
b. rate of return on sales.
c)
c. gross margin.
d)
d. operating margin.
26.
The debt ratio is an example of a
a)
a. solvency ratio.
b)
b. profitability ratio.
c)
c. liquidity ratio.
d)
d. market ratio.
27.
Gross margin is also referred to as
a)
a. operating margin.
b)
b. gross profit margin.
c)
c. rate of return on sales.
d)
d. earnings per share.
28.
A company’s cost of merchandise sold increased by 6.7% over the prior year. Management
a)
a. considers this to be an unfavorable trend.
b)
b. cannot evaluate this change without knowing the change in sales.
c)
c. should reduce the amount of merchandise purchased during the next year.
d)
d. should reduce operating costs to maintain a constant operating margin.
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