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Financial statement ratios ROI ROE debit entry accruals

Financial statement ratios support informed judgments and decision making most effectively:
a. When viewed for a single year.

b. When viewed as a trend of entity data.

c. When compared to an industry average for the most recent year.

d. When the trend of entity data is compared to the trend of industry data.

The return on investment measure of performance:
a. Is relevant only to business enterprises.

b. Is used by individuals to compare investment performance.

c. Is calculated using sales as the amount of return.

d. Is calculated using total assets at the beginning of the period as the amount of investment.

A firm's net income is $260,000 on sales of $31.5 million. Average assets for the period were $7 million. For the year:
a. Margin was 5%, turnover was 1.2, and ROI was 6%.

b. Margin was 6%, turnover was 1.5, and ROI was 6%.

c. Margin was 4%, turnover was 1.2, and ROI was 4.8%.

d. Margin was 1%, turnover was 4.5, and ROI was 4.5%.

Return on equity:
a. Will be the same as return on investment.

b. Relates dividends and turnover.

c. Relates dividends and owners' equity.

d. Relates net income and owners' equity.

A current ratio of 6 is usually an indication that the firm:
a. Has a low degree of liquidity.

b. Has a reasonable degree of liquidity.

c. Has not made the most productive use of its assets.

d. Has made the most productive use of its assets.

An expanded version of the accounting equation could be:
a. A + Rev = L + OE - Exp

b. A L = Paid-in Capital Rev Exp

c. A = L + Paid-in Capital + Beginning Retained Earnings + Rev Exp

d. A = L + Paid-in Capital Rev + Exp

In the buyer's records, the purchase of merchandise on account would:
a. Increase assets and increase expenses.

b. Increase assets and increase liabilities.

c. Increase liabilities and increase paid-in capital.

d. Have no effect on total assets.

A debit entry will:
a. Decrease an asset account.

b. Increase a liability account.

c. Increase paid-in capital.

d. Increase an expense account.

The effect of an adjustment is:
a. To correct an entry that was not in balance.

b. To increase the accuracy of the financial statements.

c. To record transactions not previously recorded.

d. To close the books.

The balance in the Accrued Wages Payable account increased from $12,200 at the beginning of the month to $15,000 at the end of the month. Wages accrued during the month totaled $61,000.
a. Wages paid during the month totaled $58,200.

b. Wages paid during the month totaled $64,800.

c. Wages expense for the month totaled $58,200.

d. Wages expense for the month totaled $76,000.

Solution Preview

Financial practice accounting multiple choice
Financial statement ratios support informed judgments and decision making most effectively:
a. When viewed for a single year.

b. When viewed as a trend of entity data.

c. When compared to an industry average for the most recent year.

***d. When the trend of entity data is compared to the trend of industry data.

COACHING TIP: The richest data set

The return on investment measure of performance:
***a. Is relevant only to business enterprises.

b. Is used by individuals to compare investment performance.

c. Is calculated using sales as the amount of return.

d. Is calculated using total assets at the beginning of the period as the amount of investment.

A firm's net income is $260,000 on sales of $31.5 million. Average assets for the period were $7 million. For the year:
a. Margin was 5%, turnover was 1.2, and ROI was 6%.

b. ...

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