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CHAPTER 4
RATIO ANALYSIS
TRUE OR FALSE QUESTIONS
(Correct answer indicated by T for True answers and F for False answers)
business.
ment.
accounts receivable are not included in the current assets.
accounts receivable credit sales revenue by the average accounts receivable.
annual accounts receivable turnover ratio.
market value, can be misleading.
tax by total average assets.
interest payments as they fall due.
borrow funds from its stockholders for expansion, guaranteeing them a 10 percent
dividend rate. The stockholders should be eager to lend the money to the company.
into net income.
per share.
period by cost of food sales for the period.
solution to that problem.
number of guests served during a meal period.
seat turnover figure.
revenue by the number of seats in the restaurant.
restaurant has no value.
number of days in the month, times the number of rooms available.
measure.
balance sheet.
operations, external comparisons can be ignored.
the assets are owned or leased.
MULTIPLE CHOICE QUESTIONS
(correct answer indicated by asterisk)
1. One method of comparing a ratio is with an industry average. Three other methods are:
2. A current ratio of 2 to 1 means that:
3. The three major users of ratios are:
4. Window dressing means:
5. A company has cash $1,400, accounts receivable $2,100, marketable securities $4,000,
inventory $1,200, accounts payable $4,700, accrued expenses $500, and common stock
$1,000. Its quick ratio is:
6. Accounts receivable turnover is:
7. The debt to equity ratio is:
8. A debt to equity ratio of 1.75 means there is:
9. Net return on assets is calculated by dividing:
10. A company’s sales revenue for the year is $1,000,000 and income before tax $100,000. Tax
rate is 50%. Average total assets are $750,000. Average stockholders’ equity is $250,000.
Return on stockholders’ equity is:
11. The net income to sales revenue ratio is also known as the:
12. The credit card receivables turnover ratio is:
13. The price earnings ratio is calculated by:
14. Inventory turnover is calculated by dividing:
15. A restaurant with a monthly food inventory turnover of 4.0 would find that its food inventory
is turning over:
16. Ratio analysis is most favorable for an individual restaurant when:
17. Restaurant seat turnover is calculated by dividing:
18. Double occupancy is:
19. Sales revenue per available room can be calculated by:
20. Financial leverage is:
