Question 1

Which of the following ratios will usually have the lowest percent?

Accepted Answer

A) Return on investment 
B) Return on total equity 
C) Return on common equity 
D) Return on total assets 
E) There is not enough information to tell 
A) Return on investment 
B) Return on total equity 
C) Return on common equity 
D) Return on total assets 
E) There is not enough information to tell

Question 2

Interim reports are useful in analyzing the impact of seasonality.

Accepted Answer

A) True 
 B)False

Question 3

In profitability analysis,absolute numbers are more meaningful than relative numbers because the analyst needs to know if one firm earned more dollars than the other.

Accepted Answer

A) True 
 B)False

Question 4

In the analysis of profitability,if equity earnings are substantial,it is advisable to:

Accepted Answer

A) consider them as extraordinary. 
B) consider them as nonrecurring. 
C) investigate the earning power of the parent outside of the related investing activities. 
D) recompute the debt ratio and times interest earned to remove the impact of equity earnings. 
E) use the DuPont method to lessen the impact of equity earnings. 
A) consider them as extraordinary. 
B) consider them as nonrecurring. 
C) investigate the earning power of the parent outside of the related investing activities. 
D) recompute the debt ratio and times interest earned to remove the impact of equity earnings. 
E) use the DuPont method to lessen the impact of equity earnings.

Question 5

Match the ratio that goes with each formula.
-$\frac {\text {  Net Income Before Nonrecurring Items -Dividends on Redeemable preferred Stock }} { \text {Average Total Equity} }$

Accepted Answer

A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin 
A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin

Question 6

Match the ratio that goes with each formula.
-$\frac {\text {Net Income Before Nonrecurring Items
Preferred Dividends  }} { \text {Average Common Equity} }$

Accepted Answer

A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin 
A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin

Question 7

Match the ratio that goes with each formula.
-$\frac { \text { Net Sales} } { \text { Average Total Assets } }$

Accepted Answer

A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin 
A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin

Question 8

Which of the following could cause return on assets to decline when net profit margin is increasing?

Accepted Answer

A) Sale of investments at year-end 
B) Increased turnover of operating assets 
C) Decline in book value 
D) A stock split 
E) Purchase of a new building at year-end 
A) Sale of investments at year-end 
B) Increased turnover of operating assets 
C) Decline in book value 
D) A stock split 
E) Purchase of a new building at year-end

Question 9

When used properly,pro forma financial information makes a positive contribution to financial reporting.

Accepted Answer

A) True 
 B)False

Question 10

Which suppliers of funds bear the greatest risk and should therefore earn the greatest return?

Accepted Answer

A) Bondholders 
B) Suppliers 
C) General creditors such as banks 
D) Preferred shareholders 
E) Common shareholders 
A) Bondholders 
B) Suppliers 
C) General creditors such as banks 
D) Preferred shareholders 
E) Common shareholders

Question 11

Match the ratio that goes with each formula.
-$\frac {\text { Net Income Before Noncontrolling Interest and Nonrecurring Items + [(Interest Expense $ ) \times(1-1 $ Tax Rate $ )] $  }} { \text {Average (Long-Term Liabilities + Equity)} }$

Accepted Answer

A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin 
A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin

Question 12

Match the ratio that goes with each formula.
-$\frac {\text { Net Income Before Noncontrolling Interest and Nonrecurring Items }} { \text { Average Total Assets} }$

Accepted Answer

A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin 
A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin

Question 13

Operating assets exclude investments,land,and intangibles from the asset base.

Accepted Answer

A) True 
 B)False

Question 14

Gross profit margin is an important ratio of merchandising firms because:

Accepted Answer

A) their investments in real property are high. 
B) cost of goods sold is usually the largest expense. 
C) selling expenses,like advertising,are usually quite high. 
D) it measures their ability to collect receivables. 
E) it measures their ability to use total assets. 
A) their investments in real property are high. 
B) cost of goods sold is usually the largest expense. 
C) selling expenses,like advertising,are usually quite high. 
D) it measures their ability to collect receivables. 
E) it measures their ability to use total assets.

Question 15

Match each term to its best description or definition.
-Interim reporting

Accepted Answer

A) Full or partial statements expressed in percentages of a given base. 
B) Requires full financial statements on a quarterly basis. 
C) All statement figures are expressed as a percentage of a base figure from that year's statement. 
D) A breakdown by major lines of business,only required in SEC reporting. 
E) A breakdown by major lines of business.
F)All statement figures are expressed as a percentage of base-year figures.
G)Requires estimation of some expense items.
H)A comparison of financial data over time.
I)Visual aids to understanding financial data. 
A) Full or partial statements expressed in percentages of a given base. 
B) Requires full financial statements on a quarterly basis. 
C) All statement figures are expressed as a percentage of a base figure from that year's statement. 
D) A breakdown by major lines of business,only required in SEC reporting. 
E) A breakdown by major lines of business.
F)All statement figures are expressed as a percentage of base-year figures.
G)Requires estimation of some expense items.
H)A comparison of financial data over time.
I)Visual aids to understanding financial data.

Question 16

Match the ratio that goes with each formula.
-$\frac { \text {Net Sales} } { \text { Average Operating Assets } }$

Accepted Answer

A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin 
A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin

Question 17

Match between columns
                        Premises: Net Profit Margin F1F1F1S1uf0b4F1F1F10 Total Asset Turnover
Operating Income Margin F1F1F1S1uf0b4F1F1F10 Operating Asset Turnover

Accepted Answer

The Answer of operating asset turnover and return on assets is...

Question 18

Return on assets cannot fall under which of the following circumstances?
$\begin{array} { l l } 
&\underline{\text { Net Profit Margin} } &\underline{ \text { Tatal Asset Tunover} } \
\text { I.}&\text { decline } & \text { rise } \
\text {II.} &\text { rise } & \text { decline } \
\text { III.}&\text { rise } & \text { rise } \
\text { IV.}&\text { decline } & \text { decline }
\end{array}$

Accepted Answer

A) I 
B) II 
C) III 
D) IV 
E) The ratio could fall under all of the answers. 
A) I 
B) II 
C) III 
D) IV 
E) The ratio could fall under all of the answers.

Question 19

DuPont analysis can be done with net income or operating income figures as long as the related asset base is consistent.

Accepted Answer

A) True 
 B)False

Question 20

The operating ratios may give significantly different results from net earnings ratios if a firm has large amounts of nonoperating assets generating income.

Accepted Answer

A) True 
 B)False

Which of the following ratios will usually have the lowest percent?

Interim reports are useful in analyzing the impact of seasonality.

In profitability analysis,absolute numbers are more meaningful than relative numbers because the analyst needs to know if one firm earned more dollars than the other.

In the analysis of profitability,if equity earnings are substantial,it is advisable to:

Match the ratio that goes with each formula. - $\frac {\text { Net Income Before Nonrecurring Items -Dividends on Redeemable preferred Stock }} { \text {Average Total Equity} }$

Match the ratio that goes with each formula. - $\frac {\text {Net Income Before Nonrecurring ItemsPreferred Dividends }} { \text {Average Common Equity} }$

Match the ratio that goes with each formula. - $\frac { \text { Net Sales} } { \text { Average Total Assets } }$

Which of the following could cause return on assets to decline when net profit margin is increasing?

When used properly,pro forma financial information makes a positive contribution to financial reporting.

Which suppliers of funds bear the greatest risk and should therefore earn the greatest return?

Match the ratio that goes with each formula. - $\frac {\text { Net Income Before Noncontrolling Interest and Nonrecurring Items + [(Interest Expense ) \times(1-1 Tax Rate \( )] \) }} { \text {Average (Long-Term Liabilities + Equity)} }$

Match the ratio that goes with each formula. - $\frac {\text { Net Income Before Noncontrolling Interest and Nonrecurring Items }} { \text { Average Total Assets} }$

Operating assets exclude investments,land,and intangibles from the asset base.

Gross profit margin is an important ratio of merchandising firms because:

Match each term to its best description or definition. -Interim reporting

Match the ratio that goes with each formula. - $\frac { \text {Net Sales} } { \text { Average Operating Assets } }$

Return on assets cannot fall under which of the following circumstances? I. decline rise II. rise decline III. rise rise IV. decline decline

DuPont analysis can be done with net income or operating income figures as long as the related asset base is consistent.

The operating ratios may give significantly different results from net earnings ratios if a firm has large amounts of nonoperating assets generating income.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 8: Profitability

Which of the following ratios will usually have the lowest percent?

Interim reports are useful in analyzing the impact of seasonality.

In profitability analysis,absolute numbers are more meaningful than relative numbers because the analyst needs to know if one firm earned more dollars than the other.

In the analysis of profitability,if equity earnings are substantial,it is advisable to:

Match the ratio that goes with each formula. - Net Sales Average Total Assets \frac { \text { Net Sales} } { \text { Average Total Assets } } Average Total Assets Net Sales​

Which of the following could cause return on assets to decline when net profit margin is increasing?

When used properly,pro forma financial information makes a positive contribution to financial reporting.

Which suppliers of funds bear the greatest risk and should therefore earn the greatest return?

Operating assets exclude investments,land,and intangibles from the asset base.

Gross profit margin is an important ratio of merchandising firms because:

Match each term to its best description or definition. -Interim reporting

Match the ratio that goes with each formula. - Net Sales Average Operating Assets \frac { \text {Net Sales} } { \text { Average Operating Assets } } Average Operating Assets Net Sales​

Return on assets cannot fall under which of the following circumstances? I. decline rise II. rise decline III. rise rise IV. decline decline

DuPont analysis can be done with net income or operating income figures as long as the related asset base is consistent.

The operating ratios may give significantly different results from net earnings ratios if a firm has large amounts of nonoperating assets generating income.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Match the ratio that goes with each formula. - $\frac { \text { Net Sales} } { \text { Average Total Assets } }$

Match the ratio that goes with each formula. - $\frac { \text {Net Sales} } { \text { Average Operating Assets } }$