You're anxious to start investing in the stock market. You decide to buy stocks in companies that you are personally interested in. You need to choose between your favorite shoe company, SweetFeet, and your favorite sport drink company, SportsAde. Upon looking at the balance sheet for each company, you see that SportsAde's assets total 3.5 million, and their liabilities equal 500,000. SweetFeet's assets are only 2 million, and their liabilities equal 1.8 million. However, you know from your business classes that you should also look at the income statements for each company. Upon looking at the income statements for both companies, you find that SportsAde's revenues are less than their expenses, and the company has a loss of 2 million. SweetFeet's revenues are 2.9 million, and their expenses are only 1.2 million, giving them a profit of 1.7 million.
Looking back at previous income statements show similar trends for each company. Which company do you choose to invest in and why?
A) SportsAde because SweetFeet is continually losing money.
B) SweetFeet because analyzing both the balance sheet and income statement show that they have a healthier financial position than SportsAde.
C) SportsAde because the balance sheet shows that their assets are higher than SweetFeet's assets.
D) SweetFeet because the income statement shows that they have a higher profit.
E) SportsAde because analyzing both the balance sheet and income statement show that they have a healthier financial position than SweetFeet.
Question 2 - In deciding on a product line, managers should balance _____ and product requirements.
A) convenience goods
B) specialty goods
C) last year's sales
D) demographics
E) customer preferences
Question 3 - Which of the following is the profitability ratio that is calculated by dividing net income after taxes by revenue?
A) Debt-to-equity ratio
B) Current ratio
C) Return on sales
D) Acid test ratio
E) Net profit margin ratio
Question 4 - A group of similar products that differ only in relatively minor characteristics is called:
A) inventory.
B) a product line.
C) product design.
D) design planning.
E) inventory control.
Question 5 - Which of the following is a leverage ratio?
A) Inventory turnover ratio
B) Current ratio
C) Return on sales
D) Debt-to-equity ratio
E) Acid test ratio
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