Multiple Choice Questions 1. Which of the following ratios is used to measure a firms efficiency? a.

Question:

Multiple Choice Questions
1. Which of the following ratios is used to measure a firm’s efficiency?
a. Net Income ÷ Equity
b. Net Sales ÷ Average Total Assets
c. Assets ÷ Equity
d. Net Income ÷ Sales
2. Which of the following ratios is used to measure the profit earned on each dollar invested in a firm?
a. Current ratio
b. ratio
c. Return on sales ratio
d. Return on equity
3. Which of the following is the formula to compute the net profit margin percentage?
a. Net Income ÷ Net Sales
b. Operating Income ÷ Net Sales
c. Net Income ÷ Average Equity
d. Net Income + [Interest Expense x (1 – Tax Rate)] ÷ Average Total Assets
4. Which of the following ratios is used to measure a firm’s profitability?
a. Liabilities ÷ Equity
b. Sales ÷ Assets
c. Assets ÷ Equity
d. Net Income ÷ Net Sales
5. Why might an industry group have higher five-year average returns on equity than do other industries?
a. It is a higher-risk industry.
b. It is a lower-risk industry.
c. It is a high-growth industry.
d. None of these.
6. The yield ratio measures:
a. The income available for common stockholders on a per-share basis
b. The rate at which dividends provide a return to stockholders
c. The proportion of a corporation’s profits that are returned to the stockholders immediately as dividends
d. The profit earned by a firm through the use of capital supplied by stockholders
7. Corporations are required to disclose earnings per share on which of the following statements?
a. Income statement
c. Statement of cash flows
d. All of these
Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio. Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...