71. When comparing the current ratio to the quick ratio:
A. The current ratio will always be greater
B. The quick ratio will always be greater
C. The quick ratio is sometimes greater and sometimes less than the current ratio
D. They always will be the same
72. The gross profit rate represents:
A. Total sales revenue.
B. The percentage change in net sales from the prior period.
C. The percentage of sales revenue remaining after providing for the cost of the merchandise sold.
D. Net income stated as a percentage of total sales revenue.
73. A rising gross profit rate most strongly suggests:
A. An increase in physical sales volume.
B. Strong consumer demand for the company's products.
C. Intense competition.
D. Increased short-term solvency.
74. Operating income excludes each of the following, except:
A. Interest expense.
B. Income taxes.
C. Depreciation.
D. Prepaid expenses.
75. Assume that net sales are increasing faster than the rate of inflation, and that the company's gross profit rate is rising. Of the following, the most logical conclusion is that:
A. The company's cost of purchasing merchandise is rising rapidly.
B. Operating expenses are falling.
C. Demand for the company's products is very strong.
D. The company has achieved an increase in sales volume by reducing its sales prices.
76. In calculating earnings per share, the denominator of the equation includes:
A. Only common stock outstanding.
B. Common stock plus preferred stock.
C. Common stock less preferred stock.
D. The total shares of authorized common stock.
77. On common size income statements, each component in the income statement is represented as a percentage of:
A. Net income.
B. Sales.
C. Total assets.
D. Profit.
78. In a multiple-step income statement, interest expense usually is not classified as an operating expense because interest charges:
A. Do not contribute to the production of revenue.
B. Stem from the manner in which assets are financed, not the manner in which they are used in business operations.
C. Relate directly to the cost of goods sold.
D. The statement is incorrect. Interest usually is classified as an operating expense.
79. In a multiple-step income statement, income taxes are not classified as operating expenses because:
A. Income taxes do not contribute to the production of revenue.
B. Income taxes stem from the manner in which assets are financed, not the manner in which they are used in business operations.
C. Not all forms of business organization are subject to income taxes.
D. The statement is incorrect; income taxes are classified as operating expenses.
80. Traditionally, stock of financially sound companies with stable earnings usually have a price/earnings ratio of:
A. 90.
B. 12.
C. 1/4.
D. 3.