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One important difference between return on assets (ROA) and return on common shareholder's equity (ROCE) is that: Select one or more: a

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1. One important difference between return on assets (ROA) and return on common shareholder's equity (ROCE) is that:
   Select one or more:
   a. ROA does not differentiate based on how a company finances its assets; ROCE does.
   b. ROCE does not distinguish between the different types of income items, such as income from continuing operations, discontinued operations, extraordinary items and changes in accounting principles; ROA does.
   c. ROA does not distinguish between the different types of income items, such as income from continuing operations, discontinued operations, extraordinary items and changes in accounting principles; ROCE does.
   d. ROCE does not differentiate based on how a company finances its assets; ROA does.
2. The profit margin for ROA indicates the ability of a firm to generate earnings for a particular level of:
   Select one or more:
   a. shareholders' equity
   b. sales
   c. assets
   d. working capital
3. Asset turnover represents:
   Select one or more:
   a. The ability of the firm to generate income from operations for a particular level of sales.
   b. The ability to generate sales from a particular investment in assets.
   c. The number of days, on average, it takes management to turnover assets.
   d. The ability to manage the level of investment in assets for a particular level of assets.
4. Which factor does not explain differences or changes in ROA?
   Select one or more:
   a. Cyclicality of sales
   b. Product life cycle
   c. Operating leverage
   d. Financial leverage
5. Which of the following would be considered a committed fixed cost (a cost that is incurred regardless of the level of activity during the period)?
   Select one or more:
   a. depreciation expense
   b. cost of goods sold
   c. bad debt expense
   d. advertising expense
6. to calculate diluted EPS, the accountant does all of the following except:
   Select one or more:
   a. adds back to net income any compensation expense recognized on the employee stock options
   b. adds back any dividends on convertible preferred stock the firm subtracted in computing net income to common shareholders.
   c. enters only the net incremental shares issued (shares issued under options minus assumed shares repurchased) in the computation of diluted EPS.
   d. adds back any interest expense (net of taxes) on convertible bonds
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7. Which of the following is the primary objective in most financial statement analysis?
   Select one or more:
   a. To value a firm's equity securities
   b. To look for unrecorded liabilities
   c. To define markets for the firm
   d. To establish a firm's strategy within the industry
8. Critics of EPS as a measure of profitability point out that it does not consider:
   Select one or more:
   a. adjustments for dilutive securities and the adjustment to weighted average number of
   shares outstanding for complex capital structures.
   b. simple capital structures.
   c. the amount of assets or capital required to generate a particular level of earnings.
   d. the deduction of preferred stock dividends from net income.
9. Which of the following are better indicated by percentage change statements than common-size statements?
   Select one or more:
   a. stability
   b. profitability
   c. growth and decline
   d. monetary changes
10. Common-size analysis requires the analyst to be aware that percentages can change because of all of the following except:
    Select one or more:
    a. interaction effects between the numerator and denominator
    b. changes in expenses in the numerator independent of changes in sales
    c. All of these are possible explanations
    d. changes in sales independent of changes in expenses