Match Each Ratio That Follows to Its Use (Items A-H)

question 129

Multiple Choice

Match each ratio that follows to its use (items a-h) . Items may be used more than once.
-Return on total assets

• A)Assess the profitability of the assets
• B)Assess how effectively assets are used
• C)Indicate the ability to pay current liabilities
• D)Indicate how much of the company is financed by debt and equity
• E)Indicate instant debt-paying ability
• F)Assess the profitability of the investment by common stockholders
• G)Indicate future earnings prospects
• H)Indicate the extent to which earnings are being distributed to common stockholders

Familiarize with the classification sections in a Statement of Financial Affairs.

Recognize the indicators of insolvency for a company.

Evaluate assets and liabilities to prepare for liquidation or reorganization decisions.

Distinguish between asset, liability, equity, revenue, and expense accounts.

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Definitions:

CVP Income Statement

An income statement format that organizes costs based on whether they are fixed or variable and is used in Cost-Volume-Profit analysis to determine how revenues, costs, and profits are influenced by changes in volume.

Variable Expenses

Costs that change in proportion to the activity of a business such as sales volume or production levels.

CVP Income Statement

A financial report that shows the effects of varying levels of sales and product costs on a company's net income.

Gross Profit

The financial measure representing the difference between sales revenue and the cost of goods sold before deducting administrative and selling expenses.