31 which of the following is not a component of return on equity a profit margin b a 4352247

31.Which of the following is NOT a component of return on equity?

a.profit margin

b.asset turnover

c.financial leverage

d.gross profit margin

32.A high _______ indicates that a company is controlling its product costs.

a.return on assets

b.return on equity

c.gross profit margin

d.operating profit margin

33.Which of the following is used to measure a firm's ability to convert its profits into cash?

a.operating cash flow to assets

b.operating profit margin

c.return on assets

d.accounts receivable turnover

34.Inventory turnover

a.is the ratio of inventory to sales

b.measures the ability of a company to convert its investment in inventory into sales

c.is the ratio of sales to inventory

d.cannot be used to evaluate a firm's operating strategy

35.Which of the following statements about inventory turnover is NOT true?

a.inventory turnover compares income statement information with balance sheet information

b.inventory turnover is the ratio of cost of goods sold to inventory

c.if the amount of inventory increases relative to cost of goods sold, a company is less effective in using its resources

d.an increase in inventory turnover indicates that a company is investing too heavily in inventory for the amount of product it is selling

36.Which of the following is primarily an effectiveness measure?

a.collection turnover

b.net income

c.industry average

d.accounts receivable turnover

37.Which of the following is a measure of a company's efficiency in controlling period costs (i.e., selling and administrative expenses)?

a.operating profit margin

b.profit margin

c.gross profit margin

d.net income

38.Which of the following is NOT a measure of effectiveness?

a.inventory turnover

b.asset turnover

c.accounts receivable turnover

d.operating profit margin

Figure 13-2

Wannamaker's Wonders     Delano's Deals

Accounts receivable$  159,000$126,000

Inventory384,000254,000

Operating revenues1,060,000768,000

Cost of goods sold559,000235,000

Operating income360,000305,000

Gross profit501,000533,000

39.Refer to the table in Figure 13-2. What is inventory turnover for Wannamaker's Wonders?

a.1.07

b..93

c.1.46

d..83

40.Refer to the table in Figure 13-2. What is inventory turnover for Delano's Deals?

a.1.46

b..83

c.1.07

d..93

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