1, Volume changes cause volatility in the gross profit margin when ____.

A.

cost of goods sold includes fixed costs which do not vary proportionately with volume changes.

B.

calculated in a company with little capital.

C.

calculated in a company having no fixed costs.

D.

cost of goods sold includes costs that vary proportionately with volume changes

2, Which of the following is an advantage of calculating gross profit margin?

A.

It indicates the profitability of a firm after considering all operating expenses.

B.

It helps the analyst asses the capital structure of the firm.

C.

It indicates how much profit the firm generates after deducting cost of goods sold.

D.

It allows the analyst to determine if the firm has been affected by inflation.

3, Which of the following is a benefit of analyzing a common-size income statement?

A.

It allows comparison of the firm to itself from year-to-year, but not to its competitors.

B.

It shows the relative magnitude of expenses relative to net sales.

C.

It shows the relative magnitude of revenues and expenses to total assets.

D.

It shows the relative magnitude of revenues and expenses relative to profits.

4, When reporting comprehensive income, which method is unacceptable?

A.

On the face of the income statement.

B.

In a separate statement of comprehensive income.

C.

In the statement of stockholders' equity.

D.

In the equity section of the balance sheet.