1. A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do?

1. Evaluate financial statements of companies within a given industry of approximately the same value.
2. Determine which companies in the same industry are at approximately the same stage of development.
3. Compare the mix of assets, liabilities, capital, revenue, and expenses within a company over time or between companies within a given industry without respect to relative size.
4. Ascertain the relative potential of companies of similar size in different industries.

2. Synergys income statement shows sales of $1,000, cost of goods sold of $400. Pre-interest operating expense $300, and interest expense of $100. Interest coverage ratio of Synergy is close to:

1. 2 times.
2. 3 times.
3. 4 times.
4. 5 times.

3. During September, a firms inventory account included the following transactions:

September 1	Inventory	25 units@$4.00
September 14	Purchased	60 units@$4.20
September 20	Sold	40 units@$6.00
September 21	Purchased	30 units @ $4.25
September 25	Sold	40 units @$6.10

Assuming periodic FIFO inventory costing, gross profit for September was:

1. $132
2. $147
3. $153
4. $160

4. Pears PLC adheres to IFRS. It recently imported inventory for $100 million, paid import tax of $ 2milion, carrying in cost of $5 million and spent $5 million for storage prior to selling the goods. The amount it charged to inventory expense ($ millions) was closest to:

1. $100
2. $105
3. $107
4. $115

5. In an inflationary environment, a LIFO liquidation will most likely result in an increase in:

1. Inventory.
2. Accounts payable.
3. Operating profit margin.
4. None of them.