Concept explainers
(a)
Ratio Analysis: Ratio analysis refers to the relationship that exists among the financial data that are available in the financial statement. It is expressed in the form of a mathematical formula, depicting the relationships that exist with one another items in the financial statement. It is used to analyze the performance of the company expressed for the intra company comparison, industry average comparison and intercompany comparison.
To Ascertain: If increase in the earnings per share is a good or a bad news for a company.
(b)
To Ascertain: If increase in the
(c)
To Ascertain: If increase in the debt to assets ratio is good or bad news for a company.
(d)
To Ascertain: If decrease in
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Financial Accounting: Tools for Business Decision Making, 8th Edition
- All are financial measures, except: A. Market share B. Revenue growth C. Earnings per share D. Reduction of past due accountsarrow_forwardIndicate whether the following are a measure of (a) liquidity, (b) profitability, or (c) leverage. 1. Quick ratio  2. Times interest earned ratio  3. Current ratio  4. Ratio of net sales to assets  5. Return on total assets  6. Accounts receivable turnover  7. Return on stockholders' equity  8. Book value per share of common stock  9. Ratio of liabilities to stockholders' equity  10. Acid-test ratio  11. Earnings per share of common stock  12. Merchandise inventory turnover  13. Working capitalarrow_forwardWhich of the following events will cause a company’s current ratio to decrease?  a. The sale of inventory for credit (accounts receivable)  b. Issuing stock for cash  c. The sale of inventory for cash  d. Paying off long-term debt with casharrow_forward
- The current ratio: a. Is used to help assess a company's ability to pay its debts in the near future. b. Measures the effect of operating income on profit. c. Is used to measure the relationship between assets and long-term debt. d. Is used to measure a company's collection period.arrow_forwardWhich of the following is correct? Select one: a. Unearned revenues are considered increases to stockholders' equity. b. Working capital is measured as current liabilities minus current assets. C. Unearned revenues will eventually become revenue earned. d. Working capital increases when a company pays the principal on a long-term note.arrow_forwardWhich of the following would indicate an improvement in a company's financial position, holding other things constant? The profit margin declines. O The MV/BV ratio increases. The ROA decreases. The TIE increases. O The liability-to-asset ratio increases.arrow_forward
- Liquidity Ratios: a. Measure the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. b. Measure the ability of the company to survive over a long period of time. c. Measure the income or operating success of the company for a given period of time.arrow_forwardProfitability Ratios: a. Measure the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. b. Measure the ability of the company to survive over a long period of time. c. Measure the income or operating success of a company for a given period of time.arrow_forwardWhich of the following statement is correct? Select one: O a. Return on assets is the ratio of net income after interest expense to total assets O b. All options are correct statement C. Average collection period is the average number of times it takes for the company's customers to pay their bills o d. Increase in the debt ratio indicate more reliance on debt as a source of financingarrow_forward
- Which of the following can lead to an increase in the net working capital of a firm?  A. A decrease in inventory.  B. An increase in accounts receivable.  C. An increase in accounts payable.  D. A decrease in the checking account balance.arrow_forwardWhich of the following generally indicates an improvement in a company’s financial position? The times interest earned ratio declines The days sales outstanding ratio increases The quick Ratio increases The current ratio declines The total assets turnover ratio decreasesarrow_forwardSolvency Ratios: a. Measure the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. b. Measure the ability of the company to survive over a long period of time. c. Measure the income or operating success of a company for a given period of time.arrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning