Question

1/ Which one of the following steps adds the most value to a financial statement analysis?

a/ Determine the purpose of the analysis

b/ Develop conclusions

c/ Analyze and interpret the ratios

d/ Prepare common-size analysis

2/ In accounting terms, the different business activities that the firm engages in or the different geographic regions it does business in are referred to as

a/ operating activities.

b/ business segments.

c/ operating segments.

d/ operating divisions.

3/ The following data was taken from the accounting records of White Oleander Corporation:

	2020	2019
Total assets	$950,000	$850,000
Total liabilities	250,000	240,000
Preferred shares	75,000	75,000
Common shares	300,000	300,000
Retained earnings	325,000	235,000
Additional data:
Net income		140,000
Interest expense		25,000
Sales revenue		980,000

The return on equity for 2020 is

20.0%.

21.4%.

26.7%.

46.7%.

4/ Two companies have an identical amount of current assets and current liabilities. Donald Inc. has 40% of its current assets invested in inventory, whereas Mickey Corp. has 30% of its current assets invested in inventory. Which of the following statements is true?

A.Donald will have the higher quick ratio.

B.Donald will have the higher current ratio.

C.The companies are equally liquid because their current ratios are the same.

D.Donald is less liquid than Mickey.

Answer 1

D. Statement of Donald is less liquid than Mickey is True. Because Donald invested more amount of inventory than Mickey.