31) The ratio that indicates the amount of assets that are financed by creditors is:

A) debt to stockholders’ equity.

B) debt to total retained earnings ratio.

C) rate of return on common stockholders’ equity.

D) None of the above.

32) The debt in relation to the risk taken by stockholders is measured by:

A) debt to stockholders’ equity.

B) gross profit ratio.

C) rate of return to stockholders.

D) None of these answers are correct.

33) The lower the times interest earned ratio, the more likely:

A) a default in payment will occur.

B) a business needs to borrow money.

C) a business will suffer a loss.

D) interest payments can be made.

34) The ratio that indicates how much profit is generated from each sales dollar to cover general and selling expenses is:

A) gross profit rate.

B) return on sales.

C) rate of return on total assets.

D) rate of return on common stockholders’ equity.

35) The ratio that measures the productivity of total assets used is the:

A) rate of return on total assets.

B) return on sales.

C) Inventory turnover.

D) rate of return on common stockholders’ equity.

36) Which of the following ratios helps evaluate how well a company is earning profit for the common stockholders?

A) Times interest earned ratio

B) Return on sales ratio

C) Return on total assets

D) Rate of return on common stockholders’ equity

37) Which of the following ratios measures the earnings of a company on each sales dollar?

A) Return on assets

B) Return on sales

C) Return on inventory

D) Return on stockholders’ equity

38) Compute the gross profit rate when net sales are $350,000 and gross profits are $178,500.

A) 51:10

B) 54%

C) 51%

D) 54:10

39) Compute the gross profit rate when sales are $400,000; net sales are $380,000 and gross profits are $125,000.

A) 31.25%

B) 32.89%

C) 0.3125 to 1

D) 0.3289 to 1

40) Asset management ratios measure:

A) a company’s ability to earn a profit.

B) a company’s ability to meet short-term obligations.

C) how well a company is using debt versus equity.

D) how effectively a company is using its assets.