T/F Flashcards
Vertical analysis ratios are an example of s profitability ratio
T
A benchmark ratio can be stated as a single value or a range of values
T
To perform vertical analysis on an income statement each amount is divided by net sales
T
An increase in merch costs reduces the gross margin
T
Gross profit is also referred to as the rate of return on sales
F
The operating margin only gives investors the best indication of how effectively a business is earning profit from Its normal business operations
T
Best company’s benchmark operating expense ratio is between 29% and 31%. A decline in its operating expense ratio from 34.5% to 33.6% is a favorable trend.
T
Reducing the amount of operating expenses always has a positive impact on a business
F
A business should never make a business decision for the sole purpose of meeting a benchmark ratio
T
A vertical analysis ratio for accounts receivable above the target range may indicate that TheeGreen is to restrictive in extending credit to its customers
F
Investors use the debt ratio to rate the ability of the business to pay its current and long term liabilities
T
The debt ratio is an example of a solvency ratio
T
Best company’s target range for its debt ratio is 20-25%. The company’s debt ratio decreased from 34.5-26.7%. This is an unfavorable trend.
F
A horizontal analysis ratio is calculated by dividing the difference between the current and prior amounts by the current period amount
F
EPS is the most widely recognized measure of a corporations financial performance
T
