Identify the ratio that cannot be computed given the

30. Identify the ratio that cannot be computed given the following information for a firm: Diluted earnings per
share, $3.57; market price of the firm’s stock, $47.75; average common equity, $879,550; net income,
$99,772; average total capital, $625,740; aftertax interest expense, $14,885.
a. price-earnings
b. market-to-book
c. return on common equity
d. return on capital
(difficult, L.O. 2, Section 2, b)
31. A firm has the following growth rates for the last four years: 2000, 39.8%; 2001, 34.2%; 2002, 28.4%;
2003, 29.1%. From a standpoint of trend analysis, what conclusion might an analyst reach regarding the
firm’s revenue growth?
32. A firm has the following operating income rates for the last four years: 2000, 9.0%; 2001, 8.9%; 2002,
9.1%; 2003, 8.8%. From a standpoint of trend analysis, what conclusion might an analyst reach regarding
the firm’s revenue growth?
4

33. There are two key ratios that measure operating profitability. The numerator for the __________ ratio uses
income while the __________ ratio uses revenues less cost of goods sold in its computation.
(moderate, L.O. 2, Section 2, b)
34. The analyst must exercise caution when using ratios as part of the analysis of a firm. The fact that ratios
often vary across industries is an example of what is called:
a. an accounting method discrepancy
b. an industry and business difference
c. a business environment change
d. an ambiguous ratio definition
(moderate, L.O. 5, Section 4, b)