Amy wants to know if inventory is increasing as a percentage of total assets. Wh

Question

Amy wants to know if inventory is increasing as a percentage of total assets. Which one of these

statements most easily provides the information she is seeking?

A. Statement of cash flows

B. Balance sheet

C. Common-size balance sheet

D. Income statement

Which one of these would not be paid from free cash flow?

A. Cash dividends

B. Repayment of principal on a long-term debt

C. Repurchase of outstanding shares of common stock

D. New equipment purchase

What is the highest marginal rate at which corporate income is taxed?

A. 15%

B. 34%

C. 35%

D. 39%

Who pays taxes on earnings distributed as dividends?

A. The issuing corporation

B. The shareholder receiving the dividend

C. Both the issuing corporation and the shareholder

D. Neither the issuing corporation nor the shareholder

Explanation / Answer

The financial ratios can be categorized in to balance sheet ratio, income statement ratio, and combined ratio.

A ratio which is used to establish the relation between elements of balance sheet only is called balance sheet ratio.

In the given case, both elements of ratio belong to balance sheet. It means she (Amy) requires information related to balance sheet. Thus, the correct answer is option B.

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