31. What affect(s) the market price of common stock shares?
A. changes in international tensions
B. economy-wide factors
C. specific industry factors
D. changes in exchange rates
E. all of the above
32. Most individuals prefer _____ to _____ and they will want a _____ expected return if they purchase common stock shares than if they invest in a certificate of deposit.
A. more risk; less risk; higher
B. less risk; more risk; higher
C. more risk; less risk; lower
D. less risk; more risk; lower
E. none of the above
33. Most financial statement analysis explores some aspect of a firm’s
A. profitability, only.
B. risk, only.
C. value, only.
D. profitability, or its risk, or both.
E. employee turnover.
34. Which of the following is/are limitations of ratio analysis?
A. use of acquisition cost for assets rather than current replacement cost or net realizable value
B. latitude firms have in selecting from among various generally accepted accounting principles
C. changes in many ratios correlate with each other
D. must recognize conditions that have changed between the periods being compared when comparing the size of a ratio between periods for the same firm
E. all of the above
35. Ratios provide little information unless the analyst places them in a context. After calculating the ratios, the analyst must compare them with some standard. Which of the following is/are possible standard(s)?
A. The planned ratio for the period.
B. The corresponding ratio during the preceding period for the same firm.
C. The corresponding ratio for a similar firm in the same industry.
D. The average ratio for other firms in the same industry.
E. All of the above are possible standards.
36. Ratios provide little information unless the analyst places them in a context. After calculating the ratios, the analyst must compare them with some standard. Which of the following is not a possible standard?
A. The planned ratio for the period.
B. The corresponding ratio during the preceding period for the same firm.
C. The corresponding ratio for a similar firm in the same industry.
D. The average ratio for other firms in the same industry.
E. The corresponding ratio during the succeeding period for the same firm.
37. Measures of profitability for a firm engaging in operations selling merchandise in its stores to generate net income do not include:
A. rate of return on assets.
B. rate of return on common shareholders’ equity.
C. earnings per share of common stock.
D. inventory turnover ratio.
E. none of the above.
38. The following ratio relates the results of operating performance to the investments (assets) of a firm without regard to how the firm financed those investments.
Net Income + Interest Expense Net of Income Tax Savings
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Average Total Assets
The ratio is called a rate of return on:
A. assets.
B. long-term investments.
C. shareholders’ equity.
D. net income.
E. net income and interest expense net of income tax savings.
39. The rate of return on assets relates the results of operating performance to the investments of a firm without regard to how the firm financed those investments. The ratio is calculated as follows:
A. Net Income + Interest Expense Net of Income Tax Savings
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Average Total Assets
B. Net Income
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Average Total Assets
C. Net Income + Interest Expense
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Average Total Assets
D. Net Income + Interest Expense Net of Income Tax Savings
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Ending Total Assets
E. Net Income
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Ending Total Assets
40. Analysis of the Return on Assets has particular relevance to the
A. lenders.
B. employees.
C. lower-level managers.
D. government regulators.
E. unions.