Deck 2: A Further Look at Financial Statements

Question 1

A liability is classified as a current liability if it is to be paid within the coming year.

Answer 1

True

Question 2

Cash and supplies are both classified as current assets.

Answer 2

True

Question 3

The current ratio is computed as current liabilities divided by current assets.

Answer 3

False

Question 4

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

Question 5

The main difference between intangible assets and property plant and equipment is the length of the asset's life.

Question 6

The investment category on the balance sheet normally includes investments that are intended to be held for a short period of time (less than one year).

Question 7

The debt to assets ratio measures the percentage of assets financed by creditors.

Question 8

Long-term investments appear in the property plant and equipment section of the balance sheet.

Question 9

Liquidity ratios measure the short-term ability of a company to pay its maturing obligations and meet unexpected needs for cash.

Question 10

The current ratio takes into account the composition of current assets.

Question 11

Stockholders' equity is divided into two parts: common stock and retained earnings.

Question 12

The current ratio is calculated by dividing current assets by current liabilities.

Question 13

It is possible for an asset to be a current asset even though the expected conversion of that asset into cash is to be longer than one year or the normal operating cycle.

Question 14

Profitability ratios measure the operating success of a company for a given period of time.

Question 15

Solvency is a company's ability to pay interest as it comes due and to repay the balance of a debt due at its maturity.

Question 16

The current ratio is a more dependable indicator of liquidity than working capital.

Question 17

Solvency ratios measure the short-term ability of the company to pay its maturing obligations.

Question 18

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

Question 19

The excess of current assets over current liabilities is called working capital.

Question 20

The current ratio includes long-term investments in the numerator.

Question 21

An intangible asset

A)derives its value from the rights and privileges it provides the owner.
B)is worthless because it has no physical substance.
C)is converted into a tangible asset during the operating cycle.
D)cannot be classified on the balance sheet because it lacks physical substance.

Question 22

A current asset is

A)the last asset purchased by a business.
B)an asset which is currently being used to produce a product or service.
C)usually found as a separate classification in the income statement.
D)expected to be converted to cash or used in the business within a relatively short period of time.

Question 23

Which of the following is not a current liability?

A)Salaries and Wages Payable
B)Accounts Payable
C)Taxes Payable
D)Bonds Payable

Question 24

Intangible assets are

A)listed directly under current assets on the balance sheet.
B)not listed on the balance sheet because they do not have physical substance.
C)listed after property plant and equipment.
D)listed as a long-term investment on the balance sheet.

Question 25

Both investors and creditors have an interest in a company's ability to generate favorable cash flows.

Question 26

Trademarks would appear in which balance sheet section?

A)Intangible assets
B)Investments
C)Property plant and equipment
D)Current assets

Question 27

On a classified balance sheet companies usually list current assets

A)in alphabetical order.
B)with the largest dollar amounts first.
C)in the order in which they are expected to be converted into cash.
D)in the order of acquisition.

Question 28

Which of the following is not considered an asset?

A)Equipment
B)Dividends
C)Accounts receivable
D)Inventory

Question 29

The operating cycle of a company is the average time that is required to go from cash to

A)sales in producing revenues.
B)cash in producing revenues.
C)inventory in producing revenues.
D)accounts receivable in producing revenues.

Question 30

Liabilities are generally classified on a balance sheet as

A)small liabilities and large liabilities.
B)present liabilities and future liabilities.
C)tangible liabilities and intangible liabilities.
D)current liabilities and long-term liabilities.

Question 31

In a classified balance sheet assets are usually classified as

A)current assets; long-term assets; property plant and equipment; and intangible assets.
B)current assets; long-term investments; property plant and equipment; and common stocks.
C)current assets; long-term investments; tangible assets; and intangible assets.
D)current assets; long-term investments; property plant and equipment; and intangible assets.

Question 32

The current ratio is current assets less accounts payable.

Question 33

Working capital is total assets less total liabilities.

Question 34

Which of the following would not be classified as a long-term liability?

A)Current maturities of long-term debt
B)Bonds payable
C)Mortgage payable
D)Lease liabilities

Question 35

The current ratio helps users determine if a company can meet its near-term obligations.

Question 36

Which of the following is not classified properly as a current asset?

A)Supplies
B)Debt investments
C)A fund to be used to purchase a building within the next year
D)A receivable from the sale of an asset to be collected in two years

Question 37

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

A)an intangible asset.
B)property plant and equipment.
C)a current asset.
D)a long-term investment.

Question 38

Equipment is classified on the balance sheet as

A)a current asset.
B)property plant and equipment.
C)an intangible asset.
D)a long-term investment.

Question 39

It is not true that current assets are resources that are expected to be

A)realized in cash within one year.
B)sold within one year.
C)consumed within one year.
D)acquired within one year.

Question 40

Long-term creditors consider a lower debt to assets ratio to be less risky.

Question 41

Use the following data to calculate the current ratio. $\begin{array} { l } \text { Koonce Office Supplies}\\ \text { Balance Sheet }\\ \text { December 31,2022}\\\begin{array}{lr}\text { Cash } & \$ 195,000 \\\text { Accounts receivable } & 150,000 \\\text { Inventory } & 165,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 270,000\\ \text { Buildings}&\$315,000\\ \text {Less: Accumulated }\\\text { depreciation } (60,000) & 255,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1590,000\\\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 210,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 240,000 \\\quad \text { Total liabilities } & 480,000\\\\\\\text { Common stock } & 360,000 \\\text { Retained earnings } &{750,000} \\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1590,000\\\end{array}\end{array}$

A)2.13 : 1
B)1.44 : 1
C)2.86 : 1
D)2.50 : 1

Question 42

Use the following data to determine the total dollar amount of assets to be classified as investments. $\begin{array} { l } \text {Carne Auto Supplies }\\ \text { Balance Sheet }\\ \text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 0,000 \\\text { Accounts receivable } & 100,000 \\\text { Inventory } & 140,000 \\\text { Prepaid insurance } & 80,000 \\\text { Stock investments } & 180,000 \\\text { Land } & 190,000\\\text { Buildings } & \$ 230,000 & \\\text { Less: Accumulated } & \\\quad \text { depreciation } (60,000) & 170,000 \\\text { Patent } & 140,000 \\\text { Total assets } & \$ 1,070,000\\\end{array}&\begin{array}{lrr}\text { Accounts payable } & \$ 130,000 \\\text { Salaries and wages payable } & 20,000 \\\text { Mortgage payable } & 180,000 \\\text { Total liabilities } & 330,000\\\\\\\text { Common stock } & 240,000 \\\text { Retained earnings } & 500,000 \\\text { Total stockholders' equity } & 740,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,070,000\\\end{array}\\\end{array}$

A)$0
B)$320000
C)$180000
D)$280000

Question 43

Use the following data to calculate the current ratio. $\begin{array} { l } \text {Carne Auto Supplies }\\ \text { Balance Sheet }\\ \text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 0,000 \\\text { Accounts receivable } & 100,000 \\\text { Inventory } & 140,000 \\\text { Prepaid insurance } & 80,000 \\\text { Stock investments } & 180,000 \\\text { Land } & 190,000\\\text { Buildings } & \$ 230,000 & \\\text { Less: Accumulated } & \\\quad \text { depreciation } (60,000) & 170,000 \\\text { Patent } & 140,000 \\\text { Total assets } & \$ 1,070,000\\\end{array}&\begin{array}{lrr}\text { Accounts payable } & \$ 130,000 \\\text { Salaries and wages payable } & 20,000 \\\text { Mortgage payable } & 180,000 \\\text { Total liabilities } & 330,000\\\\\\\text { Common stock } & 240,000 \\\text { Retained earnings } & 500,000 \\\text { Total stockholders' equity } & 740,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,070,000\\\end{array}\\\end{array}$

A)2.07 : 1
B)1.67 : 1
C)3.00 : 1
D)2.60 : 1

Question 44

Use the following data to determine the total dollar amount of assets to be classified as property plant and equipment.

Question 45

N3 Corporation has assets of $4200000 common stock of $1092000 and retained earnings of $665000.What are the creditors' claims on their assets?

A)$3773000
B)$1757000
C)$2443000
D)$4627000

Question 46

Use the following data to determine the total amount of working capital. $\begin{array} { l } \text { Koonce Office Supplies}\\ \text { Balance Sheet }\\ \text { December 31,2022}\\\begin{array}{lr}\text { Cash } & \$ 195,000 \\\text { Accounts receivable } & 150,000 \\\text { Inventory } & 165,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 270,000\\ \text { Buildings}&\$315,000\\ \text {Less: Accumulated }\\\text { depreciation } (60,000) & 255,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1590,000\\\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 210,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 240,000 \\\quad \text { Total liabilities } & 480,000\\\\\\\text { Common stock } & 360,000 \\\text { Retained earnings } &{750,000} \\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1590,000\\\end{array}\end{array}$

A)$360000
B)$390000
C)$130000
D)$180000

Question 47

Use the following data to determine the total dollar amount of assets to be classified as property plant and equipment. $\begin{array} { l } \text {Edie's Flomer Shoppe }\\\text {Balance Sheet }\\\text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 126,000 \\\text { Accounts receivable } & 120,000 \\\text { Inventory } & 210,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 285,000\\\text { Buildings } & \$ 339,000 & \\\text { Less: Accumulated } & & \\\quad \text { depreciation } (60,000) & 279,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1575,000\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 165,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 270,000 \\\hline \text { Total liabilities } & 465,000\\\\\\\text { Common stock } & \$ 360,000 \\\text { Retained earnings } &{750,000}\\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,575,000\end{array}\end{array}$

A)$1029000
B)$774000
C)$834000
D)$564000

Question 48

Use the following data to determine the total dollar amount of assets to be classified as property plant and equipment. $\begin{array} { l } \text { Koonce Office Supplies}\\ \text { Balance Sheet }\\ \text { December 31,2022}\\\begin{array}{lr}\text { Cash } & \$ 195,000 \\\text { Accounts receivable } & 150,000 \\\text { Inventory } & 165,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 270,000\\ \text { Buildings}&\$315,000\\ \text {Less: Accumulated }\\\text { depreciation } (60,000) & 255,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1590,000\\\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 210,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 240,000 \\\quad \text { Total liabilities } & 480,000\\\\\\\text { Common stock } & 360,000 \\\text { Retained earnings } &{750,000} \\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1590,000\\\end{array}\end{array}$

A)$990000
B)$525000
C)$735000
D)$585000

Question 49

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

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

Question 50

Use the following data to determine the total amount of working capital. $\begin{array} { l } \text {Carne Auto Supplies }\\ \text { Balance Sheet }\\ \text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 0,000 \\\text { Accounts receivable } & 100,000 \\\text { Inventory } & 140,000 \\\text { Prepaid insurance } & 80,000 \\\text { Stock investments } & 180,000 \\\text { Land } & 190,000\\\text { Buildings } & \$ 230,000 & \\\text { Less: Accumulated } & \\\quad \text { depreciation } (60,000) & 170,000 \\\text { Patent } & 140,000 \\\text { Total assets } & \$ 1,070,000\\\end{array}&\begin{array}{lrr}\text { Accounts payable } & \$ 130,000 \\\text { Salaries and wages payable } & 20,000 \\\text { Mortgage payable } & 180,000 \\\text { Total liabilities } & 330,000\\\\\\\text { Common stock } & 240,000 \\\text { Retained earnings } & 500,000 \\\text { Total stockholders' equity } & 740,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,070,000\\\end{array}\\\end{array}$

A)$260000
B)$240000
C)$160000
D)$420000

Question 51

These are selected account balances on December 31 2022. $$\begin{array} { l r } \text { Land } & \$ 150,000 \\\text { Land (held for future use) } & 225,000 \\\text { Buildings } & 1,200,000 \\\text { Inventory } & 300,000 \\\text { Equipment } & 675,000 \\\text { Furniture } & 150,000 \\\text { Accumulated Depreciation } & 450,000\end{array}$$ What is the total amount of property plant and equipment that will appear on the balance sheet?

A)$2250000
B)$1950000
C)$2700000
D)$1725000

Question 52

Use the following data to determine the total dollar amount of assets to be classified as current assets. $\begin{array} { l } \text {Carne Auto Supplies }\\ \text { Balance Sheet }\\ \text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 0,000 \\\text { Accounts receivable } & 100,000 \\\text { Inventory } & 140,000 \\\text { Prepaid insurance } & 80,000 \\\text { Stock investments } & 180,000 \\\text { Land } & 190,000\\\text { Buildings } & \$ 230,000 & \\\text { Less: Accumulated } & \\\quad \text { depreciation } (60,000) & 170,000 \\\text { Patent } & 140,000 \\\text { Total assets } & \$ 1,070,000\\\end{array}&\begin{array}{lrr}\text { Accounts payable } & \$ 130,000 \\\text { Salaries and wages payable } & 20,000 \\\text { Mortgage payable } & 180,000 \\\text { Total liabilities } & 330,000\\\\\\\text { Common stock } & 240,000 \\\text { Retained earnings } & 500,000 \\\text { Total stockholders' equity } & 740,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,070,000\\\end{array}\\\end{array}$

A)$390000
B)$250000
C)$570000
D)$330000

Question 53

Use the following data to determine the total dollar amount of assets to be classified as current assets. $\begin{array} { l } \text {Edie's Flomer Shoppe }\\\text {Balance Sheet }\\\text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 126,000 \\\text { Accounts receivable } & 120,000 \\\text { Inventory } & 210,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 285,000\\\text { Buildings } & \$ 339,000 & \\\text { Less: Accumulated } & & \\\quad \text { depreciation } (60,000) & 279,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1575,000\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 165,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 270,000 \\\hline \text { Total liabilities } & 465,000\\\\\\\text { Common stock } & \$ 360,000 \\\text { Retained earnings } &{750,000}\\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,575,000\end{array}\end{array}$

A)$801000
B)$336000.
C)$546000.
D)$546000

Question 54

K2 Corporation has assets of $3600000 common stock of $936000 and retained earnings of $570000.What are the creditors' claims on their assets?

A)$3234000
B)$1506000
C)$2094000
D)$3966000

Question 55

What is the order in which assets are generally listed on a classified balance sheet?

A)Current and long-term
B)Current; property plant and equipment; long-term investments; intangibles
C)Current; property plant and equipment; intangibles; long-term investments
D)Current; long-term investments; property plant and equipment intangibles

Question 56

Use the following data to determine the total dollar amount of assets to be classified as investments. $\begin{array} { l } \text {Edie's Flomer Shoppe }\\\text {Balance Sheet }\\\text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 126,000 \\\text { Accounts receivable } & 120,000 \\\text { Inventory } & 210,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 285,000\\\text { Buildings } & \$ 339,000 & \\\text { Less: Accumulated } & & \\\quad \text { depreciation } (60,000) & 279,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1575,000\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 165,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 270,000 \\\hline \text { Total liabilities } & 465,000\\\\\\\text { Common stock } & \$ 360,000 \\\text { Retained earnings } &{750,000}\\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,575,000\end{array}\end{array}$

A)$0
B)$465000
C)$255000
D)$585000

Question 57

Use the following data to determine the total amount of working capital. $\begin{array} { l } \text {Edie's Flomer Shoppe }\\\text {Balance Sheet }\\\text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 126,000 \\\text { Accounts receivable } & 120,000 \\\text { Inventory } & 210,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 285,000\\\text { Buildings } & \$ 339,000 & \\\text { Less: Accumulated } & & \\\quad \text { depreciation } (60,000) & 279,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1575,000\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 165,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 270,000 \\\hline \text { Total liabilities } & 465,000\\\\\\\text { Common stock } & \$ 360,000 \\\text { Retained earnings } &{750,000}\\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,575,000\end{array}\end{array}$

A)$606000
B)$351000
C)$381000
D)$261000

Question 58

Use the following data to determine the total dollar amount of assets to be classified as investments. $\begin{array} { l } \text { Koonce Office Supplies}\\ \text { Balance Sheet }\\ \text { December 31,2022}\\\begin{array}{lr}\text { Cash } & \$ 195,000 \\\text { Accounts receivable } & 150,000 \\\text { Inventory } & 165,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 270,000\\ \text { Buildings}&\$315,000\\ \text {Less: Accumulated }\\\text { depreciation } (60,000) & 255,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1590,000\\\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 210,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 240,000 \\\quad \text { Total liabilities } & 480,000\\\\\\\text { Common stock } & 360,000 \\\text { Retained earnings } & {750,000} \\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1590,000\\\end{array}\end{array}$

A)$0
B)$525000
C)$255000
D)$465000

Question 59

Use the following data to determine the total dollar amount of assets to be classified as current assets. $\begin{array} { l } \text { Koonce Office Supplies}\\ \text { Balance Sheet }\\ \text { December 31,2022}\\\begin{array}{lr}\text { Cash } & \$ 195,000 \\\text { Accounts receivable } & 150,000 \\\text { Inventory } & 165,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 270,000\\ \text { Buildings}&\$315,000\\ \text {Less: Accumulated }\\\text { depreciation } (60,000) & 255,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1590,000\\\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 210,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 240,000 \\\quad \text { Total liabilities } & 480,000\\\\\\\text { Common stock } & 360,000 \\\text { Retained earnings } &{750,000} \\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1590,000\\\end{array}\end{array}$

A)$855000
B)$600000
C)$510000
D)$435000

Question 60

Which statement about long-term investments is not true?

A)They will be held for more than one year.
B)They are not currently used in the operation of the business.
C)They include investments in stock of other companies and land held for future use.
D)They do not include long-term notes receivable.

Question 61

A liquidity ratio measures the

A)income or operating success of a company over a period of time.
B)ability of a company to survive over a long period of time.
C)short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.
D)percentage of total financing provided by creditors.

Question 62

The most important information needed to determine if companies can pay their current obligations is the

A)net income for this year.
B)projected net income for next year.
C)relationship between current assets and current liabilities.
D)relationship between short-term and long-term liabilities.

Question 63

Based on the following data what is the amount of working capital? $\begin{array} { l } \text {Accounts payable. }&\$64,000\\ \text {Accounts receivable }&114,000\\ \text {Cash. }&70,000\\ \text {Intangible assets. }&100,000\\ \text { Inventory.}&138,000\\ \text {Long-term investments. }&160,000\\ \text {Long-term liabilities. }&200,000\\ \text {Short-term investments. }&80,000\\ \text {Notes payable (short-term) }&56,000\\ \text {Property, plant, and equipment. }&1,340,000\\ \text {Prepaid insurance. }&2,000\\\end{array}$

A)$284000
B)$332000
C)$370000
D)$326000

Question 64

Using the following balance sheet and income statement data what is the total amount of working capital? $$\begin{array}{l}\begin{array} { l r l r } \text { Current assets } & \$ 32,000 & \text { Net income } & \$ 42,000 \\\text { Current liabilities } & 16,000 & \text { Stockholders' equity } & 78,000 \\\text { Average assets } & 160,000 & \text { Total liabilities } & 42,000\end{array}\\\text { Total assets } \quad 120,000\end{array}$$

A)$8000
B)$32000
C)$10000
D)$16000

Question 65

Working capital is calculated by taking

A)current assets plus current liabilities.
B)current assets minus current liabilities.
C)current assets divided by current liabilities.
D)current assets times current liabilities.

Question 66

Using the following balance sheet and income statement data what is the debt to assets ratio? $$\begin{array}{l}\begin{array} { l r l r } \text { Current assets } & \$ 32,000 & \text { Net income } & \$ 42,000 \\\text { Current liabilities } & 16,000 & \text { Stockholders' equity } & 78,000 \\\text { Average assets } & 160,000 & \text { Total liabilities } & 42,000\end{array}\\\text { Total assets } \quad 120,000\end{array}$$

A)26 percent
B)13 percent
C)65 percent
D)35 percent

Question 67

Using the following balance sheet and income statement data what is the current ratio? $$\begin{array}{l}\begin{array} { l r l c } \text { Current assets } & \$ 21,000 & \text { Net income } & \$ 45,000 \\\text { Current liabilities } & 12,000 & \text { Stockholders' equity } & 63,000 \\\text { Average assets } & 132,000 & \text { Total liabilities } & 27,000\end{array}\\\text { Total assets } \quad 90,000\end{array}$$

A)0.78 : 1
B)3.33 : 1
C)0.57 : 1
D)1.75: 1

Question 68

Long-term creditors are usually most interested in evaluating

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

Question 69

Current assets divided by current liabilities is known as the

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

Question 70

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

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

Question 71

Based on the following data what is the amount of current assets? $\begin{array} { l } \text {Accounts payable. }&\$62,000\\ \text {Accounts receivable }&100,000\\ \text {Cash. }&70,000\\ \text {Intangible assets. }&100,000\\ \text { Inventory.}&138,000\\ \text {Long-term investments. }&160,000\\ \text {Long-term liabilities. }&200,000\\ \text {Short-term investments. }&80,000\\ \text {Notes payable (short-term) }&56,000\\ \text {Property, plant, and equipment. }&1,340,000\\ \text {Prepaid insurance. }&2,000\\\end{array}$

A)$232000
B)$390000
C)$252000
D)$250000

Question 72

The current ratio is

A)current assets plus current liabilities.
B)current assets minus current liabilities.
C)current assets divided by current liabilities.
D)current assets times current liabilities.

Question 73

Working capital is a measure of

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

Question 74

Use the following data to calculate the current ratio. $\begin{array} { l } \text {Edie's Flomer Shoppe }\\\text {Balance Sheet }\\\text { December 31,2022 }\\\begin{array}{lr}\text { Cash } & \$ 126,000 \\\text { Accounts receivable } & 120,000 \\\text { Inventory } & 210,000 \\\text { Prepaid insurance } & 90,000 \\\text { Stock investments } & 255,000 \\\text { Land } & 285,000\\\text { Buildings } & \$ 339,000 & \\\text { Less: Accumulated } & & \\\quad \text { depreciation } (60,000) & 279,000 \\\text { Trademarks } & 210,000 \\\text { Total assets } & \$ 1575,000\end{array}&\begin{array}{lr}\text { Accounts payable } & \$ 165,000 \\\text { Salaries and wages payable } & 30,000 \\\text { Mortgage payable } & 270,000 \\\hline \text { Total liabilities } & 465,000\\\\\\\text { Common stock } & \$ 360,000 \\\text { Retained earnings } &{750,000}\\\text { Total stockholders' equity } & 1,110,000 \\\text { Total liabilities and } & \\\text { stockholders' equity } & \$ 1,575,000\end{array}\end{array}$

A)2.34 : 1
B)2.80 : 1
C)3.31 : 1
D)1.26 : 1

Question 75

The ability of a business to pay obligations that are expected to become due within the next year or operating cycle is

A)leverage.
B)liquidity.
C)profitability.
D)wealth.

Question 76

Using the following balance sheet and income statement data what is the current ratio? $$\begin{array}{l}\begin{array} { l r l r } \text { Current assets } & \$ 32,000 & \text { Net income } & \$ 42,000 \\\text { Current liabilities } & 16,000 & \text { Stockholders' equity } & 78,000 \\\text { Average assets } & 160,000 & \text { Total liabilities } & 42,000\end{array}\\\text { Total assets } \quad 120,000\end{array}$$

A)2.0 : 1
B)2.6 : 1
C)0.5 : 1
D)2.9 : 1

Question 77

A short-term creditor is primarily interested in the __________ of the borrower.

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

Question 78

Using the following balance sheet and income statement data what is the total amount of working capital? $$\begin{array}{l}\begin{array} { l c l c } \text { Current assets } & \$ 21,000 & \text { Net income } & \$ 45,000 \\\text { Current liabilities } & 12,000 & \text { Stockholders' equity } & 63,000 \\\text { Average assets } & 132,000 & \text { Total liabilities } & 27,000\end{array}\\\text { Total assets } \quad 90,000\end{array}$$

A)$7000
B)$5000
C)$9000
D)$2000

Question 79

Working capital is

A)calculated by dividing current assets by current liabilities.
B)used to evaluate a company's liquidity and short-term debt paying ability.
C)used to evaluate a company's solvency and long-term debt paying ability.
D)calculated by subtracting current assets from current liabilities.

Question 80

Which of the following is a measure of liquidity?

A)Working capital
B)Profit margin
C)Earnings per share
D)Debt to assets ratio