ACCOUNTING 306 FINAL EXAM
CORRECT 100%
Gross Profit Margin - ANSWERPurpose: cost control, pricing and analysis... Measures
net income generated for each dollar of sales
High Gross Margin - ANSWERImplies effective inventory cost control
Change in Gross Margin - ANSWERImplies that the relationship between cost and
sales is not static
Net Profit Margin - ANSWEROverall indicator of management's ability to control
expenses. Measures net income generated for each dollar of sales
Decline in Gross Margin - ANSWERImplies that price increases are not keeping up with
cos increases, or if costs are fixed, sales volume may be declining
High Net Profit Margin - ANSWERImplies effective cost control and the business
generates sufficient volume to cover necessary expenses
Total Asset Turnover - ANSWERIncreasing overtime implies efficiency and effective
management of assets. Heavily impacted by the most significant assets on the balance
sheet. Measures productivity of a fixed assets investment
Return on Investments Interpretation - ANSWERCompare the calculated number to the
industries average
Return on Total Equity Interpretation - ANSWERROE > ROI ... Profits made on use of
long-term funds are greater than interest paid on the funds
Dividend Yield - ANSWERMeasures the return of one investment vs another. Interpret:
Depends what you're looking for
Dividend Payout ratio - ANSWERMeasures cash dividends paid relative to net earning
on common sock. Interpret: Stable over time is good, but depends what you're looking
for
Stock Options - ANSWERRight to purchase a limited number of shares of common
stock at a predetermined exercise price within a specific time period
Accounting for Stock Options - ANSWERRecognize expense in income statement by
allocating money from a grant date through investing date known as the "service period"
CORRECT 100%
Gross Profit Margin - ANSWERPurpose: cost control, pricing and analysis... Measures
net income generated for each dollar of sales
High Gross Margin - ANSWERImplies effective inventory cost control
Change in Gross Margin - ANSWERImplies that the relationship between cost and
sales is not static
Net Profit Margin - ANSWEROverall indicator of management's ability to control
expenses. Measures net income generated for each dollar of sales
Decline in Gross Margin - ANSWERImplies that price increases are not keeping up with
cos increases, or if costs are fixed, sales volume may be declining
High Net Profit Margin - ANSWERImplies effective cost control and the business
generates sufficient volume to cover necessary expenses
Total Asset Turnover - ANSWERIncreasing overtime implies efficiency and effective
management of assets. Heavily impacted by the most significant assets on the balance
sheet. Measures productivity of a fixed assets investment
Return on Investments Interpretation - ANSWERCompare the calculated number to the
industries average
Return on Total Equity Interpretation - ANSWERROE > ROI ... Profits made on use of
long-term funds are greater than interest paid on the funds
Dividend Yield - ANSWERMeasures the return of one investment vs another. Interpret:
Depends what you're looking for
Dividend Payout ratio - ANSWERMeasures cash dividends paid relative to net earning
on common sock. Interpret: Stable over time is good, but depends what you're looking
for
Stock Options - ANSWERRight to purchase a limited number of shares of common
stock at a predetermined exercise price within a specific time period
Accounting for Stock Options - ANSWERRecognize expense in income statement by
allocating money from a grant date through investing date known as the "service period"
