Post ACC305 Unit 6 Self Test Ch 8-9 Quiz

Question 1

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Profitability is the ability of the firm to generate earnings.

Question 2

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In profitability analysis, absolute numbers are more meaningful than relative numbers because the analyst needs to know if one firm earned more dollars than the other.

Question 3

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Changes in the cost of goods sold can have a substantial impact on gross profit margin

Question 4

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An interim period is a fiscal period less than one year.

Question 5

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In In order to compute gross profit margin, the income statement must be in single-step format.

Question 6

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Nonrecurring items such as extraordinary income and disposal of a segment require separate earnings per share disclosure.

Question 7

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When a stock split occurs, earnings per share must be adjusted retroactively.

Question 8

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Book value per share measures the current value of the net assets on a per share basis.

Question 9

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Stock appreciation rights give the employee compensation at a future date, based on the market price at the date of exercise in excess of a pre-established dollar market.

Question 10

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Financing leverage refers to the existence of fixed operating costs.