Which of the following is true about the impact of price inflation on financial ratio analysis?

• A.Inflation has no impact on financial ratio analysis.
• B.Inflation affects financial ratio analysis for one entity over time but not comparative analysis of entities of different ages.
• C.Inflation affects financial ratio analysis for one entity over time, as well as comparative analysis of entities of different ages.
• D.Inflation affects comparative analysis of entities of different ages but not financial ratio analysis for one entity over time.

Correct Answer: C

Inflation is the diminution over time of the purchasing power of money. Because balance sheet amounts are expressed in terms of money, historical cost amounts for different
periods are measured in units representing different levels of purchasing power. Profit or loss is also distorted because of inflation's impact on depreciation expense and inventory costs. Inflation therefore impairs the comparability of financial statement items, whether for the same entity overtime or for entities of differing ages. Presented below are partial veer-end financial statement data for entities A and B.

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What is the economic term used to describe the situation in which each nation specializes in the production of goods that it produces relatively more efficiently than other nations and imports those goods that are produced relatively more efficiently by other nations?

• A.Balance of trade.
• B.Diminishing returns.
• C.Relative competition.
• D.Comparative advantage.

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Which of the following pricing policies involves the selling company setting freight charges to customers at the actual average freight cost?

• A.Freight absorption pricing.
• B.Uniform delivered pricing.
• C.Zone pricing.
• D.FOB-origin pricing.

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In April, Raymar's budget will result in:

• A.US $45,000 in excess cash
• B.A need to borrow US $50,000 on its line of credit for the cash deficit
• C.A need to borrow US $100.000 on its line of credit for the cash deficit
• D.A need to borrow US $90,000 on its line of credit for the cash deficit

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In a database system, locking of data helps preserve data integrity by permitting transactions to have control of all the data needed to complete the transactions. However, implementing a locking procedure could lead to:

• A.Inconsistent processing
• B.Rollback failures
• C.Unrecoverable transactions
• D.Deadly embraces retrieval contention

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