exercises chapter 5.docx - TRUE\/FALSE 1 Liquidity ratios measure the degree of protection of long-term suppliers of funds 2 A given ratio is always

exercises chapter 5.docx - TRUE/FALSE 1 Liquidity ratios...

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TRUE/FALSE 1. Liquidity ratios measure the degree of protection of long-term suppliers of funds. 2. A given ratio is always computed the same way, no matter what the source. 3. The ideal way to compare income statement figures, such as sales, to balance sheet figures, such as receivables, is to use a measure of the average for the balance sheet figures. 4. In vertical common-size analysis, the dollar figure for an account is expressed in terms of that same account figure for a selected base year. 5. Absolute figures usually have more meaning than ratio comparisons. 6. In order to determine the meaning of a ratio, some kind of comparison, such as an industry average or trend analysis, is helpful. 7. Different accounting methods can cause some ratios to differ substantially. 8. Dissimilar year ends will have no impact on the results of ratios. 9. The principal asset of a merchandising firm will usually be accounts receivable. 10. A service firm will usually have a low amount of inventory, consisting primarily of supplies.
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