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TESTE DEIN WISSEN

Which of the following is not true of common size statements?

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Common size statements assist in comparing companies of different sizes

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An increase in the gross margin ratio could be explained by:

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A decrease in the purchase price of products sold.

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Formula: Return on Assets (ROA)

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ROA = (Profit (loss) / Average Total Assets) x 100 = x%

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Formula: Return on Investment (ROI)

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ROI = Profit / Amount invested

the Amount Invested in a business is Equity (or Owner's Equity)

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Formula: Return on Equity (ROE)

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ROE = (Profit available to owners / Average Equity) x 100 = x%

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What does the Return on Equity (ROE) ratio tell us?

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• Indicates the company's return on shareholders' investment.
• It measures net profit relative to the amount invested by ordinary shareholders in a company (i.e., their return on investment - ROI).
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Which of the following would happen to the current ratio, which is presently 2:1, if a company purchases inventory on credit?

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Decrease.

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What does the Return on Assets (ROA) tell us?

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• Indicates the ability of the company to generate profit from its assets investment.
• The ratio measures the return generated on the company’s assets -> dollars earned on each dollar of assets.

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Formula: Gross Margin

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Gross Margin % = (Gross profit / Sales Revenue) x 100 = x%

Represents the average gross profit on each dollar of sales.

Remember: Gross profit = Sales Revenue - Cost of Sales

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Formula: Gross Profit

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Gross Profit = Sales Revenue - Cost of Sales

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What does Gross Margin tell us?

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• Percentages of sales that is left to cover operating and other expenses and to increase the company’s profit.

• Indicates the company’ ability to maintain and adequate selling price above its costs.
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Five steps of decision making
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Identify the problem, Obtain relevant information, generate feasible options/alternatives, make a decision, implement and evaluate
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Q:

Which of the following is not true of common size statements?

A:

Common size statements assist in comparing companies of different sizes

Q:

An increase in the gross margin ratio could be explained by:

A:

A decrease in the purchase price of products sold.

Q:

Formula: Return on Assets (ROA)

A:

ROA = (Profit (loss) / Average Total Assets) x 100 = x%

Q:

Formula: Return on Investment (ROI)

A:

ROI = Profit / Amount invested

the Amount Invested in a business is Equity (or Owner's Equity)

Q:

Formula: Return on Equity (ROE)

A:

ROE = (Profit available to owners / Average Equity) x 100 = x%

Q:

What does the Return on Equity (ROE) ratio tell us?

A:
• Indicates the company's return on shareholders' investment.
• It measures net profit relative to the amount invested by ordinary shareholders in a company (i.e., their return on investment - ROI).
Q:

Which of the following would happen to the current ratio, which is presently 2:1, if a company purchases inventory on credit?

A:

Decrease.

Q:

What does the Return on Assets (ROA) tell us?

A:

• Indicates the ability of the company to generate profit from its assets investment.
• The ratio measures the return generated on the company’s assets -> dollars earned on each dollar of assets.

Q:

Formula: Gross Margin

A:

Gross Margin % = (Gross profit / Sales Revenue) x 100 = x%

Represents the average gross profit on each dollar of sales.

Remember: Gross profit = Sales Revenue - Cost of Sales

Q:

Formula: Gross Profit

A:

Gross Profit = Sales Revenue - Cost of Sales

Q:

What does Gross Margin tell us?

A:
• Percentages of sales that is left to cover operating and other expenses and to increase the company’s profit.

• Indicates the company’ ability to maintain and adequate selling price above its costs.
Q:
Five steps of decision making
A:
Identify the problem, Obtain relevant information, generate feasible options/alternatives, make a decision, implement and evaluate

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