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Rho, Sigma, and Tau Companies have the following data for the current year: Rho, Sigma, and Tau Companies have the following data for the current year: Which company would be expected to have the best potential for future common stock price appreciation? Which company would be expected to have the best potential for future common stock price appreciation?

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The price-earnings (P/E) ratio on common...

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Match each ratio that follows to its use (items a-h). Items may be used more than once. -dividends per share A)assess the profitability of the assets B)assess how effectively assets are used C)indicate the ability to pay current liabilities D)indicate how much of the company is financed by debt and equity E)indicate instant debt-paying ability F)assess the profitability of the investment by common stockholders G)indicate future earnings prospects H)indicate the extent to which earnings are being distributed to common stockholders

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Horizontal analysis of comparative financial statements includes


A) development of common-sized statements
B) calculation of liquidity ratios
C) calculation of dollar amount changes and percentage changes from the previous to the current year
D) evaluation of each component in a financial statement to a total within the statement

E) All of the above
F) C) and D)

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Richards Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000. It had 50,000 shares of common stock outstanding during the entire year. Richards Corporation's common stock is selling for $35 per share. The price-earnings ratio is


A) 7 times
B) 14 times
C) 2 times
D) 5 times

E) B) and D)
F) None of the above

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Vertical analysis refers to comparing the financial statements of a single company over several years.

A) True
B) False

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An unusual item is often related to current operations and occurs infrequently.

A) True
B) False

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The return on total assets measures the profitability of total assets, without considering how the assets are financed.

A) True
B) False

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The current ratio is


A) used to evaluate a company's liquidity and short-term debt paying ability
B) a solvency measure that indicates the margin of safety for bondholders
C) calculated by dividing current liabilities by current assets
D) calculated by subtracting current liabilities from current assets

E) A) and C)
F) All of the above

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In horizontal analysis, each item is expressed as a percentage of the


A) base year figure
B) retained earnings figure
C) total assets figure
D) net income figure

E) C) and D)
F) B) and C)

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What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?

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When percentages are utilized rather tha...

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The following information is available for Meyer Company: The following information is available for Meyer Company: Which of the following statements is correct? A) The dividend yield is 6.0%, which is of interest to investors seeking an increase in market price of their stocks. B) The dividend yield is 6.0%, which is of special interest to investors seeking to earn revenue on their investments. C) The dividend yield is 16.7%, which is of interest to bondholders. D) The dividend yield is 16.7% which is an important measure of solvency. Which of the following statements is correct?


A) The dividend yield is 6.0%, which is of interest to investors seeking an increase in market price of their stocks.
B) The dividend yield is 6.0%, which is of special interest to investors seeking to earn revenue on their investments.
C) The dividend yield is 16.7%, which is of interest to bondholders.
D) The dividend yield is 16.7% which is an important measure of solvency.

E) All of the above
F) A) and B)

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The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.Assets The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.Assets Liabilities and Stockholders' Equity Income Statement -What is the dividend yield for Diane Company? A) 7.5% B) 0.75% C) 13.3% D) 1.3% Liabilities and Stockholders' Equity The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.Assets Liabilities and Stockholders' Equity Income Statement -What is the dividend yield for Diane Company? A) 7.5% B) 0.75% C) 13.3% D) 1.3% Income Statement The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.Assets Liabilities and Stockholders' Equity Income Statement -What is the dividend yield for Diane Company? A) 7.5% B) 0.75% C) 13.3% D) 1.3% The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.Assets Liabilities and Stockholders' Equity Income Statement -What is the dividend yield for Diane Company? A) 7.5% B) 0.75% C) 13.3% D) 1.3% -What is the dividend yield for Diane Company?


A) 7.5%
B) 0.75%
C) 13.3%
D) 1.3%

E) A) and B)
F) B) and C)

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The following data are taken from the financial statements: The following data are taken from the financial statements: Determine for the current year the (a) return on total assets, (b) return on stockholders' equity, (c) return on common stockholders' equity, (d) earnings per share on common stock, (e) price-earnings ratio on common stock, and (f) dividend yield. The current market price per share of common stock is $25.Round dollar values to two decimal places and other final answers to one decimal place. Determine for the current year the (a) return on total assets, (b) return on stockholders' equity, (c) return on common stockholders' equity, (d) earnings per share on common stock, (e) price-earnings ratio on common stock, and (f) dividend yield. The current market price per share of common stock is $25.Round dollar values to two decimal places and other final answers to one decimal place.

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An analysis in which all the components of an income statement are expressed as a percentage of sales is a


A) vertical analysis
B) horizontal analysis
C) liquidity analysis
D) solvency analysis

E) A) and C)
F) A) and B)

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-Based on the data for Harding Company, what is the quick ratio, rounded to one decimal point? A) 2.7 B) 2.6 C) 1.7 D) 0.9 -Based on the data for Harding Company, what is the quick ratio, rounded to one decimal point?


A) 2.7
B) 2.6
C) 1.7
D) 0.9

E) None of the above
F) B) and C)

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The price-earnings ratio on common stock is calculated as


A) market price per share of common stock, divided by earnings per share on common stock.
B) earnings per share of common stock, divided by market price per share of common stock.
C) market price per share of common stock, divided by dividends per share of common stock.
D) dividends per share of common stock, divided by earnings per share on common stock.

E) None of the above
F) A) and D)

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Which of the following is the most useful in analyzing companies of different sizes?


A) comparative statements
B) common-sized financial statements
C) price-level accounting
D) audit report

E) B) and D)
F) None of the above

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The following information has been condensed from the December 31 balance sheets of Gabriel Co.: The following information has been condensed from the December 31 balance sheets of Gabriel Co.: (a)Determine the ratio of fixed assets to long-term liabilities for each year.(b)Determine the ratio of liabilities to stockholders' equity for each year.(c)Comment on the year-to-year changes for both ratios.Round your answers to two decimal places. (a)Determine the ratio of fixed assets to long-term liabilities for each year.(b)Determine the ratio of liabilities to stockholders' equity for each year.(c)Comment on the year-to-year changes for both ratios.Round your answers to two decimal places.

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(a) blured image (b) blured image (c)In the second year, the mar...

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The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.

A) True
B) False

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The following information is available for Jase Company: The following information is available for Jase Company: Which of the following statements is correct? A) The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year. B) The price-earnings ratio is 5% and a share of common stock was selling for 5% more than the amount of earnings per share at the end of the year. C) The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of the year. D) The market price per share and the earnings per share are not statistically related to each other. Which of the following statements is correct?


A) The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year.
B) The price-earnings ratio is 5% and a share of common stock was selling for 5% more than the amount of earnings per share at the end of the year.
C) The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of the year.
D) The market price per share and the earnings per share are not statistically related to each other.

E) A) and B)
F) A) and C)

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