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AT92 5 Test Bank for Accounting Principles, Ninth Edition The use of common se financial statements is an example of b iquity analysis c vertical analysis d horizontal analysis 6. The purchase of an office building by issuing long-term notes payable should be reported as a a cash outflow in the financing section of the statement of cash flows b. cash outflow in the investing section of the statement of cash flows c cash outflow in the operating section of the statement of cash flows d. noncash investing and financing activity 7. As an indicator of financial health, a low ratio is desirable for the a asset turnover ratio b return on assets ratio C acid-test ratio d debt to total assets ratio 8. Morris Company had inventory of $660,000 and $540,000 on December 31, 2009, and December 31, 2010, respectively. Cost of goods sold for 2010 was $3,600,000 Average days to sell the inventory is approximately a 6.7. b 6.0 c54.5 d. 60.8 9. Which of the following statements is true? a. The price-earnings ratio is a long-term solvency ratio. b. High asset turnover is a sign of efficient use of assets c. The payout ratio measures the profitability of the owners' investment d. The acid-test ratio applies to manufacturing companies but not to service or retailing businesses. 10. Miller Company purchased treasury stock with a cost of $15.000 during 2010. During the year, the company paid dividends of $20,000 and issued bonds payable for proceeds of $866,000. Cash flows from financing activities for 2010 total a $846,000 net cash inflow. b. $861,000 net cash inflow. c. $866,000 net cash outflow. d. $831,000 net cash inflow. 11. Profitability ratios include a. times interest earned. b. inventory turnover. c. the payout ratio. d. the acid-test ratio

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