1. When doing common size analysis, net sales will always be equal to 100%.

True

False

2. If total stockholders’ equity is equal to $7,400, and total assets are equal to $20,000, what will total liabilities be equal to as a percentage of total assets?

a. We would need more information to be able to answer the question.

b. 63%

c. 37%

d. 270%

3. If operating income as a percentage of net sales is equal to 12.5% in year 2013, and is equal to 11.5% in year 2014 then we can conclude that operating income decreased in 2014.

True

False

4. Assume the only categories found in current assets are cash, accounts receivable, and inventories. If inventories as percentage of total assets increases then we can conclude that

a. Accounts receivable as a percentage of total assets must decrease.

b. Cash as a percentage of total assets must decrease.

c. Either cash or accounts receivable as a percentage of total assets must decrease.

d. Cash and accounts receivable as a percentage of total assets could increase, decrease, or one of them could increase and the other decrease.