46. Vertical analysis of financial statements is accomplished by preparing commo

Question

46.

Vertical analysis of financial statements is accomplished by preparing common-size statements.

True

False

47.

Liquidity refers to how quickly an asset can be converted into cash.

True

False

48.

Purchasing marketable securities with cash will have no effect on a company's acid-test ratio.

True

False

49.

The formula for the times interest earned ratio is: Times interest earned = Earnings before interest expense and income taxes ÷ Interest expense.

True

False

50.

The price-earnings ratio is determined by dividing market price per share of stock by the earnings per share.

True

False

Explanation / Answer

Question No. 46.Vertical analysis of financial statements is accomplished by preparing common-size statements.

The Answer is :True

The common size statments prepared shows the Individual Items of Income Statement as percentage of Totals of Income Statement and Individual Assets and Liabilities as percentage of Balance Sheet.

Question No. 47.Liquidity refers to how quickly an asset can be converted into cash.

The Answer : True

The availability of liquid assets to a market or company

Question No. 48.Purchasing marketable securities with cash will have no effect on a company's acid-test ratio.

The Answer : True

Cash and Marketable securities are considered for calculation of acid test ratio. There is No effect becuase change from Cash to marketable securities.

Question No. 49.The formula for the times interest earned ratio is: Times interest earned = Earnings before interest expense and income taxes ÷ Interest expense.

The Answer : True

The formula to calculate Inerest earned ratio = Earning before Interest and Taxes (EBIT) / Interest Expense

Question No.50.The price-earnings ratio is determined by dividing market price per share of stock by the earnings per share.

The Answer ; True

The formula to calculate PE ratio = Market Price per Share / Earning per Share.

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