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UGBA 102A Lecture 13: UGBA 102A Homework 13Exam

Business Administration Undergraduate Program
Course Code
Study Guide

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Kousha Modanlou
November 16, 2018
Chapter 13 Homework: Page 685 Q 6,7; Page 686 MC 4,5,8; Page 688, 690 E13-1, E13-6
Page 685
Q6: Ratio analysis is a way to compute and show notable relationships between the content in
financial statements. Ratios demonstrate comparative proportionalities and are calculated by
dividing one amount by another, the base amount. Ratio analysis is useful in that it can shed light
on valuable relationships which are not easily visible from absolute dollar amounts.
Q7: A profitability ratio is a ratio that compares income with one or more primary activities. It
focuses on net income and how much it compares to other amounts shown on the financial
statement. An example of a profitability ratio is the return on equity ratio, which is calculated by
dividing net income by average total stockholders equity.
Page 686
MC4: C
MC5: A
MC8: A
Page 688, 690
1. D: Car manufacturer (high inventory, high property & equipment, lower inventory
turnover ratio)
2. C: Wholesale candy company (high inventory turnover ratio)
3. A: High-end clothing store (high gross profit, high inventory)
4. B: Advertising agency (low inventory, lack of gross profit)
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