7
23) The return on sales ratio is ________.
A) net income/sales
B) also called the operating ratio
C) revenue/expenses
D) expenses/sales
Learning Object.: 8.5 Calculate return on investment.
AACSB Category: Analytical thinking
24) Calculate the return on sales for a business that has net income of $25,000 and sales of
$60,000.
A) 0.52
B) 4.2
C) 42%
D) 4.2%
Learning Object.: 8.5 Calculate return on investment.
AACSB Category: Application of knowledge
25) How would you express a ratio as a percentage?
A) add a percentage sign
B) multiply it by 100
C) divide it by 100
D) None of the above.
Learning Object.: 8.5 Calculate return on investment.
AACSB Category: Analytical thinking
26) If you invest $1,525,000 in a business and earn a return of $775,000, what is your ROI?
A) 51%
B) 42%
C) 45%
D) 48%
Learning Object.: 8.5 Calculate return on investment.
AACSB Category: Application of knowledge
8
27) In the United Kingdom, the income statement is called the ________.
A) group profit and loss account
B) balance sheet
C) cash flow analysis
D) None of the above.
Learning Object.: 8.5 Calculate return on investment.
AACSB Category: Analytical thinking
28) Return on Sales (ROS) is also called a(n) ________.
A) contribution margin
B) gross margin
C) profit margin
D) operating margin
Learning Object.: 8.5 Calculate return on investment.
AACSB Category: Analytical thinking
29) The expression, “What you made over what you paid, times one hundred,” is a device to
remember how to compute ________.
A) ROS
B) ROA
C) ROI
D) None of the above.
Learning Object.: 8.5 Calculate return on investment.
AACSB Category: Analytical thinking
30) A business’s operating ratios are computed by ________.
A) cost of goods sold/sales
B) expense/sales
C) income/sales
D) income/profit
Learning Object.: 8.6 Perform same-size (common-size) analysis of an income statement.
AACSB Category: Analytical thinking
9
31) To create a same-size analysis, calculate each line item as a percentage of ________.
A) sales
B) income
C) costs
D) profit
Learning Object.: 8.6 Perform same-size (common-size) analysis of an income statement.
AACSB Category: Analytical thinking
32) When the ratio of expenses versus sales is used to express expenses as a percentage of sales,
it is called a(n) ________ ratio.
A) current
B) operating
C) quick
D) None of the above.
Learning Object.: 8.6 Perform same-size (common-size) analysis of an income statement.
AACSB Category: Analytical thinking
33) What analytic tool allows you to compare income statements from different periods, even if
the dollar figures are very different?
A) income analyses
B) asset analyses
C) financial ratios
D) same-day statements
Learning Object.: 8.6 Perform same-size (common-size) analysis of an income statement.
AACSB Category: Analytical thinking
34) Steve has heard that formulating a common-sized statement for analysis is a good practice.
Explain what he needs to do.
Learning Object.: 8.6 Perform same-size (common-size) analysis of an income statement.
AACSB Category: Analytical thinking
10
35) The ________ ratio tells you whether you have enough cash to cover your current debt.
A) financial
B) operating
C) income
D) quick
Learning Object.: 8.7 Use quick, current, and debt ratios to analyze a balance sheet.
AACSB Category: Analytical thinking
36) If you extend credit, it is critical to minimize this number to keep cash flowing.
A) receivable turnover ratio
B) inventory turnover ratio
C) collection-period ratio
D) debt-to-equity ratio
Learning Object.: 8.7 Use quick, current, and debt ratios to analyze a balance sheet.
AACSB Category: Analytical thinking
37) Firms are concerned about liquidity, which means the ability to convert inventory into credit
sales.
Learning Object.: 8.7 Use quick, current, and debt ratios to analyze a balance sheet.
AACSB Category: Analytical thinking
38) Debt ratios show the relationship between debts and equity.
Learning Object.: 8.7 Use quick, current, and debt ratios to analyze a balance sheet.
AACSB Category: Analytical thinking
39) Operating-efficiency ratios are important to a business. They include collection period, debt
period, and inventory turnover.
Learning Object.: 8.7 Use quick, current, and debt ratios to analyze a balance sheet.
AACSB Category: Analytical thinking
11
40) How does a debt-to-equity ratio help describe the financial health of a company?
Learning Object.: 8.7 Use quick, current, and debt ratios to analyze a balance sheet.
AACSB Category: Analytical thinking