1. Identify whether the following items belong on the income statement or the balance sheet.
a. Interest Expense l. Cash
b. Preferred Stock Dividends Paid m. Capital in Excess of Par
c. Plant and Equipment n. Operating Income
d. Sales o. Depreciation Expense
e. Notes Payable p. Marketable Securities
f. Common Stock q. Accounts Payable
g. Accounts Receivable r. Prepaid Expenses
h. Accrued Expenses s. Inventory
i. Cost of Goods Sold t. Net Income
j. Preferred Stock u. Retained Earnings
k. Long-Term Debt
2.Indicate in which section the following balance items belong (current assets, fixed assets, current liabilities, long-term liabilities, or equity).
a. Cash h. Capital in Excess of Par
b. Notes Payable i. Marketable Securities
c. Common Stock j. Accounts Payable
d. Accounts Receivable k. Prepaid Expenses
e. Accrued Expenses l. Inventory
f. Preferred Stock m. Retained Earnings
g. Plant and Equipment
3.What is a financial ratio?
4.Why do analysts calculate financial ratios?
5.Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain.