Question 1

Vertical analysis of financial statements is accomplished through the preparation of common-size

statements.

Response: True

Correct answer: True

Score: 1 out of 1

Question 2

The dividend yield ratio is calculated by dividing dividends per share by earnings per share.

Response: False

Correct answer: False

Score: 1 out of 1

Question 3

A company’s acid-test ratio will always be less than or equal to its current ratio.

Response: True

Correct answer: True

Score: 1 out of 1

Question 4

As the accounts receivable turnover ratio decreases, the average collection period decreases.

Response: False

Correct answer: False

Score: 1 out of 1

Question 5

A company could improve its acid-test ratio by selling some equipment it no longer needs for cash.

Response: True

Correct answer: True

Score: 1 out of 1

Question 6

When computing the return on common equity, the income available for common stockholders is
determined by deducting preferred dividends from net income.
Response: True

Correct answer: True

Score: 1 out of 1

Question 7

Book value per share is the key to predicting a company’s future income-producing ability.

Response: False

Correct answer: False

Score: 1 out of 1

Question 8

When computing the times interest earned ratio, earnings before interest expense and income taxes is
used in the numerator.

Response: False

Correct answer: False

Score: 1 out of 1

Question 9

The book value per share of the common stock reflects the balance sheet carrying value of completed
transactions.

Response: True

Correct answer: True

Score: 1 out of 1

Question 10

Net income should be adjusted by adding after-tax interest expense and preferred dividends to compute
the return on total assets.

Response: True

Correct answer: True

Score: 1 out of 1