Accounting for Non-Accountants Quiz 9

1. Companies with higher quality of earnings receive higher credit limits, lower interest costs, and higher stock prices.



2. The rate of return on investment is not an important financial statistic.



3. What produces a higher quality of earnings?

An appropriate debt-equity ratio
Highly developed brand loyalty among consumers
Stable earnings trends
All of the Above


4. What long-term information can be used to evaluate a company?

Percentage of various expenses to sales
Number of times interest and preferred stock dividends were earned
Rate of return on investment
All of the Above


5. Which formula(s) are used to calculate the rate of return on investment?

A) Rate of Return (as a ratio) = Net Income/Average Stockholder's or Owner's Equity
B) Rate of Return (as a ratio) = Net Assets/Net Income
C) Rate of Return (as a percentage) = Net Income/Average Stockholder's or Owner's Equity (x100)
D) Both A anc C

6. Based on the following information, calculate the net profit as a percentage of sales for Angels Corporation: Net income is $10,485, sales for the year are $36,500, the market price per share of stock is $29.25, and the EPS is $1.28.



Use the answers below to figure out your score, and see how well you understand the material of the first chapter. If you scored less than an 80% you should read over the chapter again before moving on.

Question 1: True
Question 2: False
Question 3: All of the Above
Question 4: All of the Above
Question 5: Both A and C
Question 6: 28.72%


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