Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Introduction to Ratios

Financial Accounting

14. Financial Statement Analysis

Introduction to Ratios

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Multiple Choice

Which of the following ratios typically uses information that is not contained in the financial statements?

Gross profit margin

Debt-to-equity ratio

Market value ratios

Current ratio

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Verified step by step guidance

Understand the question: The problem is asking which ratio typically uses information not contained in the financial statements. To solve this, we need to analyze the components of each ratio mentioned.

Step 1: Gross profit margin is calculated using the formula:

\frac{Gross Profit}{Revenue}

. Both gross profit and revenue are derived directly from the income statement, so this ratio uses information contained in the financial statements.

Step 2: Debt-to-equity ratio is calculated using the formula:

\frac{Total}{Debt} Shareholders' Equity

. Both total debt and shareholders' equity are found on the balance sheet, so this ratio also uses information contained in the financial statements.

Step 3: Current ratio is calculated using the formula:

\frac{Current}{Assets} Current Liabilities

. Both current assets and current liabilities are found on the balance sheet, so this ratio uses information contained in the financial statements.

Step 4: Market value ratios, such as price-to-earnings (P/E) ratio, often require market price per share, which is not included in the financial statements. This is why market value ratios typically use information not contained in the financial statements.