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Chapter 17 > T/F > Flashcards

Flashcards in T/F Deck (19)
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1
Q

Vertical analysis ratios are an example of s profitability ratio

A

T

2
Q

A benchmark ratio can be stated as a single value or a range of values

A

T

3
Q

To perform vertical analysis on an income statement each amount is divided by net sales

A

T

4
Q

An increase in merch costs reduces the gross margin

A

T

5
Q

Gross profit is also referred to as the rate of return on sales

A

F

6
Q

The operating margin only gives investors the best indication of how effectively a business is earning profit from Its normal business operations

A

T

7
Q

Best company’s benchmark operating expense ratio is between 29% and 31%. A decline in its operating expense ratio from 34.5% to 33.6% is a favorable trend.

A

T

8
Q

Reducing the amount of operating expenses always has a positive impact on a business

A

F

9
Q

A business should never make a business decision for the sole purpose of meeting a benchmark ratio

A

T

10
Q

A vertical analysis ratio for accounts receivable above the target range may indicate that TheeGreen is to restrictive in extending credit to its customers

A

F

11
Q

Investors use the debt ratio to rate the ability of the business to pay its current and long term liabilities

A

T

12
Q

The debt ratio is an example of a solvency ratio

A

T

13
Q

Best company’s target range for its debt ratio is 20-25%. The company’s debt ratio decreased from 34.5-26.7%. This is an unfavorable trend.

A

F

14
Q

A horizontal analysis ratio is calculated by dividing the difference between the current and prior amounts by the current period amount

A

F

15
Q

EPS is the most widely recognized measure of a corporations financial performance

A

T

16
Q

A corporations earnings per share can only be compared to the earnings per share of other corporations in the same industry

A

F

17
Q

The dividend yield is and example of a market ratio

A

F

18
Q

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

A

F

19
Q

The income statement is the primary source of data to calculate liquidity ratios

A

F