6. Using financial leverage is a good financial strategy from the viewpoint of stockholders of companies having: a. a high debt ratio. b. cyclical highs and lows. c. steady or rising profits. d. a steadily declining current ratio. e. none of the answers are correct. 7. Amortization of patents can be added to income in the operations section of the statement of cash flows because: a. it does not require the outlay of cash. b. it results in an increase in income. c. it is not a tax deductible expense. d. patent amortization is not an expense. e. it represents an inflow of cash. 8. Which of the following transactions is not reflected in a statement of cash flows? a. Sale of treasury stock b. Declaration of a stock dividend c. Purchase of foreign subsidiary with cash d. Issuance of convertible bonds e. Purchase of equipment with cash 9. Gross profit margin is an important ratio of merchandising firms because: 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. 10. Which of these items represents a definite commitment to pay out funds in the future? a. Bonds payable b. Reserves for rebuilding furnaces c. Deferred taxes d. Noncontrolling shareholders' interests e. Redeemable preferred stock