QUESTION 6

The three different perspectives on financial statement analysis are those of the:

	A.	manager, regulator, and bondholder.
	B.	manager, shareholder, and creditor.
	C.	regulator, shareholder, and creditor.
	D.	shareholder, creditor, and regulator.

QUESTION 7

Common-size financial statements:

	A.	are a specialized application of ratio analysis.
	B.	allow us to make meaningful comparisons between the financial statements of two firms that are different in size.
	C.	are prepared by having each financial statement item expressed as a percentage of some base number, such as total assets or total revenues.
	D.	All of the above are true.

QUESTION 8

Which of the following is true about the quick ratio?

	A.	The quick ratio is calculated by dividing the least liquid of current assets by current liabilities.
	B.	Service firms that tend not to carry too much inventory will see significantly higher quick ratios than current ratios.
	C.	Inventory, being not very liquid, is subtracted from total current assets to determine the most liquid assets.
	D.	Quick ratios will tend to be much larger than current ratio for manufacturing firms or other industries that have a lot of inventory.

QUESTION 9

Which of the following is true of a firm that has no debt in its capital structure?

	A.	Its return on equity (ROE) will be greater than its return on asset (ROA).
	B.	Its return on equity (ROE) will be lesser than its return on asset (ROA).
	C.	Its return on equity (ROE) will be equal to its return on asset (ROA).
	D.	None of the above.

QUESTION 10

Which of the following is a limitation of ratio analysis?

	A.	Ratios depend on accounting data based on historical costs.
	B.	Differences in accounting practices like FIFO versus LIFO make comparison difficult.
	C.	Trend analysis could be distorted by financial statements affected by inflation.
	D.	All of the above are limitations of ratio analysis.