True / False Questions
 

1. Vertical analysis compares the results of financial information with a business in the same industry for a number of consecutive periods of time. 
 

2. The quick ratio is especially useful in evaluating the liquidity of a company with fast moving inventories. 
 

3. Deducting the cost of goods sold from net income gives us operating income. 
 

4. The gross profit rate is gross profit expressed as a percentage of net sales. 
 

5. The gross profit rate usually is lowest on fast moving merchandise and highest on specialty and novelty products. 
 

6. When an income statement does not show gross profit or operating income it is called a consolidated statement. 
 

7. ROE – return on equity – is measured by dividing net income by average number of shares outstanding. 
 

8. The yield rate on stock is measured by dividing dividends per share by market price per share. 
 

9. The trend in ratios is usually more useful than looking at a single year's ratio. 
 

10. The acid test ratio includes marketable securities but does not include accounts receivable. 
 

14-1