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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following ratios is calculated using only income statement numbers?

Current Ratio

Return on Assets

Debt to Equity Ratio

Gross Profit Margin

Previous problemNext problem

Verified step by step guidance

Understand the question: The problem asks which ratio is calculated using only income statement numbers. Ratios can be derived from the income statement, balance sheet, or a combination of both.

Review the options: Analyze each ratio to determine whether it uses only income statement numbers or includes balance sheet figures.

Option 1 - Current Ratio: This ratio is calculated as \( \text{Current Assets} \div \text{Current Liabilities} \), which uses balance sheet numbers. Therefore, it does not qualify.

Option 2 - Return on Assets: This ratio is calculated as \( \text{Net Income} \div \text{Total Assets} \). While net income comes from the income statement, total assets are from the balance sheet. Thus, it does not qualify.

Option 3 - Debt to Equity Ratio: This ratio is calculated as \( \text{Total Liabilities} \div \text{Shareholders' Equity} \), both of which are balance sheet figures. Therefore, it does not qualify. The correct answer is Gross Profit Margin, which is calculated as \( \text{Gross Profit} \div \text{Net Sales} \), using only income statement numbers.