1. Management's statement of responsibility:
a. Describe that he entity's financial statements are responsibility of entity's auditors
b. States that financial statements are free of significant error
c. Affirms that management is responsible for assuring adherence to internal control policies and
d. Procedures guarantees that the firm has operated in a highly ethical manner
2. Business segment information is included in explanatory notes to financial statements because:
a. Amounts shown on financial statements of most companies are just too large to comprehend
b. Current and potential investors can make more informed judgments about the company
c. Net income from various geographic areas can be clearly determined
d. By combining these amounts, there is no need for ROI for each segment, disclosure is not needed
3. Price/earnings ratio
a. Is a measure of relative expensiveness of firm's common stock
b. Doesn't generally change by more than 1.0 (e.g. 8.2 to 9.2) during year
c. Can be used to find out cash dividend to be received during year
d. Is computed by dividing earnings multiple by net income
4. Accounts receivable turnover is computed by taking sales divided by accounts receivable ending balance.
a. True
b. False
5. Which of the given is(are) example of a measure of leverage?
a. Debt yield
b. Debt payout ratio
c. Debt/equity ratio
d. All of the above
6. As level of activity increases
a. fixed cost per unit increase
b. variable cost per unit increase
c. variable cost per unit decrease
d. fixed cost per unit decrease