Multiple Choice
Which of the following helps companies in setting the appropriate size of their sales force when calculating net sales?
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4. Merchandising Operations
Net Sales
Multiple Choice
The percent of fixed assets to total assets is an example of which type of financial analysis ratio?
A
Profitability ratio
B
Liquidity ratio
C
Vertical analysis ratio
D
Horizontal analysis ratio
Verified step by step guidance1
Understand the concept of financial analysis ratios: These ratios are tools used to evaluate a company's financial performance and position. They are categorized into types such as profitability, liquidity, vertical analysis, and horizontal analysis ratios.
Define vertical analysis ratio: This type of ratio expresses each item in a financial statement as a percentage of a base amount, such as total assets or total sales. It helps in understanding the relative size of components within a financial statement.
Identify the context of the problem: The percent of fixed assets to total assets is calculated by dividing the fixed assets by the total assets and expressing the result as a percentage. This is a comparison within the same financial statement, which aligns with vertical analysis.
Differentiate from other types of ratios: Profitability ratios measure a company's ability to generate profit, liquidity ratios assess the ability to meet short-term obligations, and horizontal analysis ratios compare financial data across different periods. None of these fit the description provided in the problem.
Conclude that the correct type of ratio is vertical analysis ratio, as it involves analyzing the proportion of fixed assets relative to total assets within the same financial statement.
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