Critical Thinking Questions and Exercises 1. Discuss why financial statement ratios are important. 2. What does it mean to state that the trend of the data is frequently more important than the data themselves? 3. Explain the importance of and show how to calculate return on investment. 4. What does it mean when the straightforward ROI calculation is expanded by using margin and turnover? 5. Explain the importance of and show how to calculate return on equity. 6. Explain the meaning of liquidity and discuss why it is important. 7. Explain why the bookkeeping system is a mechanical adaptation of the expanded accounting equation. 8. What does it mean to say that "the books are in balance"? 9. What does it mean when a revenue or expense must be accrued? 10. What does it mean when an adjustment must be made?