Question 1

How can a company improve its current ratio?

Accepted Answer

A) Work with a creditor to reclassify some current debt into long-term debt 
B) Collect accounts receivable 
C) Nothing can ethically be done to improve the current ratio 
D) Use excess cash to buy new equipment 
A) Work with a creditor to reclassify some current debt into long-term debt 
B) Collect accounts receivable 
C) Nothing can ethically be done to improve the current ratio 
D) Use excess cash to buy new equipment

Question 2

Profitability means having enough funds on hand to pay debts when they fall due.

Accepted Answer

A) True 
 B)False

Question 3

Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales.Which of the following qualities of useful information has Jackson most likely violated?

Accepted Answer

A) Comparability 
B) Relevance 
C) Faithful representation 
D) Consistency 
A) Comparability 
B) Relevance 
C) Faithful representation 
D) Consistency

Question 4

Current assets divided by current liabilities is known as the

Accepted Answer

A) working capital. 
B) current ratio. 
C) profit margin. 
D) capital structure. 
A) working capital. 
B) current ratio. 
C) profit margin. 
D) capital structure.

Question 5

A useful measure of solvency is the

Accepted Answer

A) current ratio. 
B) earnings per share. 
C) return on assets ratio. 
D) debt to assets ratio. 
A) current ratio. 
B) earnings per share. 
C) return on assets ratio. 
D) debt to assets ratio.

Question 6

Which of the following is not considered a measure of liquidity?

Accepted Answer

A) Current ratio 
B) Working capital 
C) Debt to assets ratio 
D) Each of these answer choices are liquidity measures. 
A) Current ratio 
B) Working capital 
C) Debt to assets ratio 
D) Each of these answer choices are liquidity measures.

Question 7

The periodicity assumption states that every economic entity can be separately identified and accounted for.

Accepted Answer

A) True 
 B)False

Question 8

Working capital is a measure of

Accepted Answer

A) consistency. 
B) liquidity. 
C) profitability. 
D) solvency. 
A) consistency. 
B) liquidity. 
C) profitability. 
D) solvency.

Question 9

The historical cost principle requires that when assets are acquired, they be recorded at

Accepted Answer

A) fair market value. 
B) the amount paid for them. 
C) selling price. 
D) list price. 
A) fair market value. 
B) the amount paid for them. 
C) selling price. 
D) list price.

Question 10

Solvency ratios measure the ability of a company to survive over a short period of time.

Accepted Answer

A) True 
 B)False

Question 11

Ratios that measure the income or operating success of a company for a given period of time are

Accepted Answer

A) liquidity ratios. 
B) profitability ratios. 
C) solvency ratios. 
D) trending ratios. 
A) liquidity ratios. 
B) profitability ratios. 
C) solvency ratios. 
D) trending ratios.

Question 12

Based on the following data, what is the amount of working capital?

Accepted Answer

A) $284,000 
B) $332,000 
C) $370,000 
D) $326,000 
A) $284,000 
B) $332,000 
C) $370,000 
D) $326,000

Question 13

It is assumed that the activities of Ford Motor company can be distinguished from those of General Motors because of the

Accepted Answer

A) going concern assumption. 
B) economic entity assumption. 
C) monetary unit assumption. 
D) periodicity assumption. 
A) going concern assumption. 
B) economic entity assumption. 
C) monetary unit assumption. 
D) periodicity assumption.

Question 14

Earnings per share is calculated by dividing

Accepted Answer

A) gross profit by average common shares outstanding. 
B) (net income less preferred dividends) by average common shares outstanding. 
C) net income by average common shares outstanding. 
D) net sales by average common shares outstanding. 
A) gross profit by average common shares outstanding. 
B) (net income less preferred dividends) by average common shares outstanding. 
C) net income by average common shares outstanding. 
D) net sales by average common shares outstanding.

Question 15

On a classified balance sheet, short-term investments are classified as

Accepted Answer

A) intangible assets. 
B) property, plant, and equipment. 
C) current assets. 
D) long-term investments. 
A) intangible assets. 
B) property, plant, and equipment. 
C) current assets. 
D) long-term investments.

Question 16

Long-term creditors are usually most interested in evaluating

Accepted Answer

A) liquidity. 
B) profitability. 
C) solvency. 
D) consistency. 
A) liquidity. 
B) profitability. 
C) solvency. 
D) consistency.

Question 17

Accounting information should be verifiable in order to enhance

Accepted Answer

A) comparability. 
B) faithful representation. 
C) consistency. 
D) relevance. 
A) comparability. 
B) faithful representation. 
C) consistency. 
D) relevance.

Question 18

The relationship between current assets and current liabilities is important in evaluating a company's

Accepted Answer

A) profitability. 
B) liquidity. 
C) market value. 
D) solvency. 
A) profitability. 
B) liquidity. 
C) market value. 
D) solvency.

Question 19

Ace Company is a retail store.Due to competition, it is having trouble selling its products.Thus, inventory has been building up.Ace's current ratio has not changed for the past three years, in spite of the inventory buildup.Which of the following statements is true?

Accepted Answer

A) As long as the current ratio remains constant, there is no need for concern. 
B) The composition of current assets and current liabilities does not matter. 
C) The management of Ace should consider the effect of slow moving inventory on its liquidity. 
D) Since inventory is a current asset, any increases should automatically cause the current ratio to rise. 
A) As long as the current ratio remains constant, there is no need for concern. 
B) The composition of current assets and current liabilities does not matter. 
C) The management of Ace should consider the effect of slow moving inventory on its liquidity. 
D) Since inventory is a current asset, any increases should automatically cause the current ratio to rise.

Question 20

The most generally accepted value used to report assets in accounting is fair value.

Accepted Answer

A) True 
 B)False

How can a company improve its current ratio?

Profitability means having enough funds on hand to pay debts when they fall due.

Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales.Which of the following qualities of useful information has Jackson most likely violated?

Current assets divided by current liabilities is known as the

A useful measure of solvency is the

Which of the following is not considered a measure of liquidity?

The periodicity assumption states that every economic entity can be separately identified and accounted for.

Working capital is a measure of

The historical cost principle requires that when assets are acquired, they be recorded at

Solvency ratios measure the ability of a company to survive over a short period of time.

Ratios that measure the income or operating success of a company for a given period of time are

Based on the following data, what is the amount of working capital?

It is assumed that the activities of Ford Motor company can be distinguished from those of General Motors because of the

Earnings per share is calculated by dividing

On a classified balance sheet, short-term investments are classified as

Long-term creditors are usually most interested in evaluating

Accounting information should be verifiable in order to enhance

The relationship between current assets and current liabilities is important in evaluating a company's

Ace Company is a retail store.Due to competition, it is having trouble selling its products.Thus, inventory has been building up.Ace's current ratio has not changed for the past three years, in spite of the inventory buildup.Which of the following statements is true?

The most generally accepted value used to report assets in accounting is fair value.

Introduction to Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

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Exam 2: A Further Look at Financial Statements

How can a company improve its current ratio?

Profitability means having enough funds on hand to pay debts when they fall due.

Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales.Which of the following qualities of useful information has Jackson most likely violated?

Current assets divided by current liabilities is known as the

A useful measure of solvency is the

Which of the following is not considered a measure of liquidity?

The periodicity assumption states that every economic entity can be separately identified and accounted for.

Working capital is a measure of

The historical cost principle requires that when assets are acquired, they be recorded at

Solvency ratios measure the ability of a company to survive over a short period of time.

Ratios that measure the income or operating success of a company for a given period of time are

Based on the following data, what is the amount of working capital?

It is assumed that the activities of Ford Motor company can be distinguished from those of General Motors because of the

Earnings per share is calculated by dividing

On a classified balance sheet, short-term investments are classified as

Long-term creditors are usually most interested in evaluating

Accounting information should be verifiable in order to enhance

The relationship between current assets and current liabilities is important in evaluating a company's

Ace Company is a retail store.Due to competition, it is having trouble selling its products.Thus, inventory has been building up.Ace's current ratio has not changed for the past three years, in spite of the inventory buildup.Which of the following statements is true?

The most generally accepted value used to report assets in accounting is fair value.

Introduction to Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

Filters