Question 1

Which of the following is not usually considered a measure of an entity's liquidity?
A)Current ratio.
B)Acid-test ratio.
C)Cash ratio.
D)Working capital.

Accepted Answer

The answer of Which of the following is not usually...

Question 2

NTO Designs has a margin of 7%, turnover of 1.2, and sales of $2,100,000.
Required:
Calculate NTO Designs' net income, average total assets, and return on investment (ROI).

Accepted Answer

The answer of NTO Designs has a margin of 7%,...

Question 3

Which of the following is a universally accepted measure of profitability?
A)Return on investment.
B)Return on retained earnings.
C)Return on liabilities.
D)All of these.

Accepted Answer

Return on investment is a universally accepted measure of profitability because it measures the return on the total investment made in a company.

Question 4

A current ratio of 6.0 is usually an indication that the firm:
A)has a low degree of liquidity.
B)has a reasonable degree of liquidity.
C)has not made the most productive use of its assets.
D)has made the most productive use of its assets.

Accepted Answer

A current ratio of 6.0 indicates that the firm has a high level of current assets relative to its current liabilities, suggesting that it may not be using its assets efficiently to generate revenue or growth.

Question 5

Attesson, Inc.has a current ratio of 1.9 and current assets of $136,800.
Required:
Calculate Attesson's current liabilities and working capital.

Accepted Answer

The answer of Attesson, Inc.has a current ratio of 1.9...

Question 6

Financial ratios:
A)help financial statement users to evaluate the financial characteristics of companies by putting the large dollar amounts reported in financial statements into relative terms for comparison purposes.
B)provide for a more meaningful analysis when the trends of financial ratios for a company are compared to the industry average trends over a period of time.
C)Both of these statements are true.
D)Neither of these statements is true.

Accepted Answer

Financial ratios are used to evaluate financial characteristics by comparing large dollar amounts in relative terms and are more meaningful when compared to industry averages over time.

Question 7

FGT Motorsports had net assets at the end of the year of $320,000.The only transactions affecting stockholders' equity during the year were net income of $51,000 and dividends of $11,000.
Required:
Calculate FGT Motorsports' average stockholders' equity and return on equity (ROE).

Accepted Answer

The answer of FGT Motorsports had net assets at the...

Question 8

One-Two-Tree Landscaping Services has net income of $18,000, sales of $300,000, and average total assets of $125,000.
Required:
Calculate One-Two-Tree's margin, turnover, and return on investment (ROI).

Accepted Answer

The answer of One-Two-Tree Landscaping Services has net income of...

Question 9

If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan, relative to its working capital just prior to the loan, would be:
A)Higher.
B)Lower.
C)The same.
D)Would depend on the amount borrowed.

Accepted Answer

The answer of If a firm borrowed money on a...

Question 10

For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is that it:
A)raises the current ratio.
B)lowers the current ratio.
C)doesn't affect the current ratio.
D)depends on the amount paid.

Accepted Answer

Paying a current liability decreases both current assets and current liabilities by the same amount, which increases the current ratio if it was initially greater than 1.

Question 11

Which of the following accounts is part of working capital?
A)Retained Earnings
B)Sales
C)Merchandise Inventory
D)Common Stock

Accepted Answer

Merchandise Inventory is a current asset and part of working capital, which includes current assets and current liabilities.

Question 12

2R Designs has accounts receivable of $4,100, cash of $3,500, property, plant, and equipment of $30,200, merchandise inventory of $2,200, accounts payable of $5,700, other accrued liabilities of $1,300, common stock of $10,000, and retained earnings of $23,000.
Required:
Calculate 2R Designs' working capital and current ratio.

Accepted Answer

The answer of 2R Designs has accounts receivable of $4,100,...

Quiz 3: Fundamental Interpretations Made From Financial Statement Data

Which of the following is not usually considered a measure of an entity's liquidity?

NTO Designs has a margin of 7%, turnover of 1.2, and sales of $2,100,000. Required: Calculate NTO Designs' net income, average total assets, and return on investment (ROI).

Which of the following is a universally accepted measure of profitability?

A current ratio of 6.0 is usually an indication that the firm:

Attesson, Inc.has a current ratio of 1.9 and current assets of $136,800. Required: Calculate Attesson's current liabilities and working capital.

Financial ratios:

FGT Motorsports had net assets at the end of the year of $320,000.The only transactions affecting stockholders' equity during the year were net income of $51,000 and dividends of $11,000. Required: Calculate FGT Motorsports' average stockholders' equity and return on equity (ROE).

One-Two-Tree Landscaping Services has net income of $18,000, sales of $300,000, and average total assets of $125,000. Required: Calculate One-Two-Tree's margin, turnover, and return on investment (ROI).

If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan, relative to its working capital just prior to the loan, would be:

For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is that it:

Which of the following accounts is part of working capital?