1. Sales (in millions) for a three year period are: Year 1 $6, Year 2 $6.9, and Year 3 $7.5. Using Year 1 as the base year the percentage increase in sales in Years 2 and 3 are _______ and _________, respectively.
a. 115% and 125%.
b. 115% and 109%.
c. 115% and 130%.
d. 87% and 80%.
2. An incorrect formula is
a. current ratio = current assets ÷ current liabilities.
b. receivables turnover = net credit sales ÷ average net receivables.
c. asset turnover = net income ÷ average assets.
d. payout ratio = cash dividends ÷ net income.
3. The acid-test ratio
a. is a solvency ratio.
b. measures immediate short-term liquidity.
c. includes inventory in the numerator of the formula.
d. includes total liabilities in the denominator of the formula.
4. The ratio that measures the overall profitability of assets is
a. profit margin.
b. asset turnover.
c. return on common stockholders’ equity.
d. return on assets.