Test Bank For Accounting What the Numbers Mean David Marshall 12 Edition
Accounting – What the Numbers Mean, 12e (Marshall)
Chapter 3 Fundamental Interpretations Made from Financial Statement Data
1) Financial statement ratios support informed judgments and decision-making most effectively:
A) when viewed for a single year.
B) when viewed as a trend of entity data.
C) when compared to an industry average for the most recent year.
D) when the trend of entity data is compared to the trend of industry data.
2) When comparing entity financial ratios with industry ratios:
A) it should be assumed that the data result from the consistent application of alternative accounting methods.
B) relative values at a point in time may not be significant.
C) the trend of entity ratios should be compared to the current year’s industry ratio.
D) entity ratios should not be compared with industry ratios.
3) The return on investment measure of performance:
A) is never as important a measure of management effectiveness as the amount of net income.
B) relates dividends paid to the entity’s assets.
C) is calculated using net income as the amount of return.
D) is calculated by dividing average assets for a period by the amount of net income for the period.
4) Another term for return on investment is:
A) Return on equity.
B) Return on assets.
C) Return on retained earnings.
D) Return to sender.
5) The return on investment measure of performance:
A) is relevant only to business enterprises.
B) is used by individuals to compare investment performance.
C) is calculated using sales as the amount of return.
D) is calculated using total assets at the beginning of the period as the amount of investment.
6) An advantage of the DuPont model for calculating ROI is that:
A) it focuses on asset utilization as well as net income.
B) it is easier to use than the straightforward ROI formula.
C) it uses average assets and the straightforward ROI formula does not.
D) it uses average stockholders’ equity.
7) Around Square, Inc. had an ROI of 12.5%, turnover of 5.0, and sales of $8 million for the year. Around Square’s margin for the year was:
A) $1,000,000
B) 2.5%
C) 4.0%
D) $1,600,000
8) Mamba Metals, Inc. had an ROI of 12%, margin of 3%, and sales of $20 million for the year. Mamba’s turnover for the year was:
A) 3.0
B) 4.0
C) 36%
D) $600,000
9) Rotablade’s net income was $600,000 on sales of $24 million for the year. Average assets for the year were $8 million. For the year:
A) margin was 4%, turnover was 3.0, and ROI was 12%.
B) margin was 2.5%, turnover was 2.0, and ROI was 5%.
C) margin was 4%, turnover was 2.0, and ROI was 8%.
D) margin was 2.5%, turnover was 3.0, and ROI was 7.5%
10) United Machining’s margin was 2% and turnover was 3.0 on sales of $60 million for the year. On the basis on this information:
A) net income for the year was $3,600,000, average assets were $20 million, and ROI was 2%.
B) net income for the year was $1,200,000, average assets were $10 million, and ROI was 2%.
C) net income for the year was $1,200,000, average assets were $20 million, and ROI was 6%.
D) net income for the year was $3,600,000, average assets were $10 million, and ROI was 6%.
11) Mechforce Manufacturing’s net income was $420,000 on sales of $14 million. Average assets for the year were $10 million. Margin for the year was:
A) 1.4
B) 1.8
C) 3.0%
D) 4.2%
12) Mechforce Manufacturing’s net income was $420,000 on sales of $14 million. Average assets for the year were $10 million. Turnover for the year was:
A) 1.4
B) 1.8
C) 3.0%
D) 4.2%
13) Mechforce Manufacturing’s net income was $420,000 on sales of $14 million. Average assets for the year were $10 million. ROI for the year was:
A) 1.4
B) 1.8
C) 3.0%
D) 4.2%
14) Yellowday Energy’s margin was 3% and turnover was 4.0 on sales of $50 million for the year. Net income for the year was:
A) $500,000
B) $1,500,000
C) $2,000,000
D) $6,000,000
15) Yellowday Energy’s margin was 3% and turnover was 4.0 on sales of $50 million for the year. Average assets for the year were:
A) $1,500,000
B) $6,000,000
C) $12,500,000
D) $20,000,000
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