Growth faster than turnover (i.e., revenue) growth.

17. Which of the following choices best describes reasonable conclusions an analyst might

make about the company ’ s solvency?

A. Comparing 2004 with 2000, the company ’ s solvency improved, as indicated by an

increase in its debt - to - assets ratio from 0.14 to 0.27.

B. Comparing 2004 with 2000, the company ’ s solvency deteriorated, as indicated by a

Decrease in interest coverage from 10.6 to 8.4.

C. Comparing 2004 with 2000, the company ’ s solvency improved, as indicated by the

growth in its profi ts to GBP 645 million.

18. Which of the following choices best describes reasonable conclusions an analyst might

make about the company ’ s liquidity?

A. Comparing 2004 with 2000, the company ’ s liquidity improved, as indicated by an

increase in its debt - to - assets ratio from 0.14 to 0.27.

B. Comparing 2004 with 2000, the company ’ s liquidity deteriorated, as indicated by a

decrease in interest coverage from 10.6 to 8.4.

C. Comparing 2004 with 2000, the company ’ s liquidity improved, as indicated by an

Increase in its current ratio from 0.71 to 0.75.

19. Which of the following choices best describes reasonable conclusions an analyst might

make about the company ’ s profi tability?

A. Comparing 2004 with 2000, the company ’ s profi tability improved, as indicated by

an increase in its debt - to - assets ratio from 0.14 to 0.27.

B. Comparing 2004 with 2000, the company ’ s profi tability deteriorated, as indicated by

A decrease in its net profi t margin from 11.0 percent to 5.7 percent.

C. Comparing 2004 with 2000, the company ’ s profi tability improved, as indicated by

the growth in its shareholders ’ equity to GBP 6,165 million.

20. In general, a creditor would consider a decrease in which of the following ratios to be

positive news?

A. Interest coverage (times interest earned)

B. Debt to total assets

C. Return on assets

21. Assuming no changes in other variables, which of the following would decrease ROA?

A. A decrease in the effective tax rate

B. A decrease in interest expense

C. An increase in average assets

22. What does the P/E ratio measure?

A. The “ multiple ” that the stock market places on a company ’ s EPS.

B. The relationship between dividends and market prices.

C. The earnings for one common share of stock.

Chapter 8

1. According to the IFRS Framework, which of the following is a qualitative characteristic

related to the usefulness of information in fi nancial statements?

A. Neutrality

B. Timeliness

C. Accrual basis

2. Under the IFRS Framework, changes in the elements of fi nancial statements are most

likely portrayed in the

A. balance sheet.

B. income statement.

C. cash fl ow statement.

3. Under IASB standards, which of the following categories of marketable securities is most

likely to incur an asymmetrical treatment of income and changes in value?

A. Held for trading

B. Held to maturity

C. Available for sale

4. According to IASB standards, which of the following inventory methods is most

preferred ?

A. Specifi c identifi cation

B. Weighted average cost

C. First in, fi rst out (FIFO)

5. According to IASB standards, which of the following inventory methods is not

acceptable?

A. Weighted average cost

B. First in, fi rst out (FIFO)

Date: 2016-03-03; view: 826