Balance Sheet and Entity Financial Ratios

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Quiz 1: 50 points – Due November 8, 2008 at Midnight
Each question is worth 3.33 points
1. Financial statement ratios support informed judgments and decision making most effectively: a. when viewed for a single year.
b. When viewed as a trend of entity data.
c. When compared to an industry average for the most recent year. d. When the trend of entity data is compared to the trend of industry data.

2. When comparing entity financial ratios with industry ratios: a. it should be assumed that the data result from the consistent application of alternative accounting methods. b. Relative values at a point in time may not be significant. c. Trend comparisons may not be valid because alternative accounting methods may have been used. d. Entity ratios should not be compared with industry ratios. 3. The return on investment measure of performance:

a. is not as important a measure of management effectiveness as the amount of net income. b. Relates dividends paid to the entity's assets.
c. Is calculated using net income as the amount of return?
d. Is calculated by dividing average assets for a period by the amount of net income for the period. 4. Another term for return on investment is:
a. Return on equity.
b. Return on assets.
c. Return on retained earnings.
d. None of these.
5. The return on investment measure of performance:
a. is relevant only to business enterprises.
b. Is used by individuals to compare investment performance. c. Is calculated using sales as the amount of return?
d. Is calculated using total assets at the beginning of the period as the amount of investment? 6. Which of the following is not a transaction to be recorded in the accounting records of an entity? a. Investment of cash by the owners.

b. Sale of product to customers.
c. Receipt of a plaque recognizing the firm's encouragement of employee participation in the United Way fund drive. d. Receipt of services from a "quick-print" shop in exchange for the promise to provide...
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