Reference no: EM132539653

Problem 1: Financial stability refers to the ability of an entity to:

a. meet its long-term obligations.
b. pay its regular obligations.
c. earn a high rate of profit.
d. pay its rent.

Problem 2: This is South Ltd's balance sheet at year-end.

Current assets $ 140 000
Long-term assets 320 000
Current liabilities 65 000
Long-term liabilities 119 000
Share capital 100 000
Retained earnings 176 000
The equity ratio is:

a. 40%.
b. 43%.
c. 60%.
d. 66%.

Problem 3: Financial statements in which each item is stated as a percentage of some specific base item in the same statement are known as:

a. common size statements.
b. base rate statements.
c. general purpose statements.
d. comparative statements.

Problem 4: Vertical analysis of a balance sheet usually:

a. calculates each balance sheet item as a percentage of sales.
b. calculates each balance sheet item as a percentage of total assets (funds).
c. calculates each balance sheet item as a percentage of the bank balance.
d. calculates each balance sheet item as a percentage of share capital.

Problem 5: Making Moves has the following data available.

Sales $800 000
Selling expenses 160 000
Profit 320 000

Using vertical analysis, express selling expenses as a percentage of the base amount.

a. 60%
b. 50%
c. 20%
d. 15%