The formula "net income minus preferred dividends divided by average common shareholders' equity" yields:
A) return on common shareholders' equity.
B) return on assets.
C) earnings per common share.
D) return on sales.
E) rate of return.
12) Which of the following would NOT be a red flag in a financial statement analysis?
A) Short number of days' in accounts receivable
B) Decreased cash flow
C) High debt ratio
D) Low inventory turnover
E) Earning problems
13) Which of the following would be a red flag in a financial statement analysis?
A) High debt ratio
B) High inventory turnover
C) High current ratio
D) High earnings per share
E) Cash flow higher than net income
14) The lower the times interest earned ratio, the more likely:
A) a default in payment will occur.
B) a business needs to borrow money.
C) a business will suffer a loss.
D) interest payments can be made.
E) a business can pay its debt.
15) The ratio that indicated how many days it takes to turn accounts receivable into cash is the:
A) accounts receivable turnover ratio.
B) average turnover ratio.
C) average collection period.
D) quick assets turnover ratio.
E) accounts receivable ratio.
16) Carla's Fashions has an average days' in receivable of 30 days. You could infer that Carla's:
A) bills her customers quarterly.
B) bills her customers monthly.
C) has an accounts receivable turnover of 6.
D) has an accounts receivable turnover of 4.
E) has an accounts receivable turnover of 0.
17) If days in receivables is 35 days, this means that from the date of:
A) purchase to the date of payment is 35 days.
B) sale to the date of receipt of payment is 35 days.
C) discount to the date of receipt of payment is 35 days.
D) invoice to the date of payment is 35 days.
E) sale to the date of invoice is 35 days.
18) If management wishes to determine the delinquency of charge customers, they could use the:
A) rate of return on total assets.
B) rate of return on equity.
C) accounts receivable turnover.
D) quick ratio.
E) current ratio.
19) If management wishes to know the ability to pay off upcoming debts, they could use the __________ ratio.
20) Merchandise inventory turnover measures the relationship between __________ and __________.
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