To keep this chapter from involving too much memorization, we provide our students with a formula sheet for use on exams. That makes a few of the questions trivially easy, but most require some thought, and some are downright challenging. Even the very easy ones make students think about the ratios. The challenging questions are labeled CHALLENGING, and most students will agree with that designation. Some of these questions are just definitions, but others require real thought about the make-up of the ratios and relationships among the ratios. We tell our students that to answer some of these questions it is useful (1) to write out the relevant ratio or ratios, (2) then to think about how the ratios would change if the accounting data changed, and (3) occasionally to make up
illustrative data to test their conclusions. Note that there is some overlap between the True/False and the multiple choice questions, as some T/F statements are used in the MC questions. Ratio analysis involves analyzing financial statements to help appraise a firm's financial position and strength.
Answer the following statement true (T) or false (F)
True
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