When You Are Interpreting Financial Ratios, It Is Useful to Compare

question 155

True/False

When you are interpreting financial ratios, it is useful to compare a company's ratios to the same ratios from a prior period or to the ratios of another company in the same industry.

Understand the effect of "act of God" exceptions on bailment liability.

Recognize the conditions necessary for a valid sub-bailment.

Identify the application of res ipsa loquitur in bailment cases.

Understand the distinction between goods and services, including examples and characteristics.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales within a certain range, such as rent, salaries, and insurance.

Variable Cost

A cost that varies with the level of output or activity, such as materials and labor costs.

Operating Leverage

A financial ratio that measures the degree to which a firm or project can increase operating income by increasing revenue.

Operating Income

The income earned from a company's day-to-day operations, calculated before taking into account interest and taxes.