Question 1

A firm has $30,000 cash and other current assets amount to $55,000.Total amount of current liabilities add up to $50,000.Calculate the total working capital of this firm.

Accepted Answer

E) Working capital = Current assets - current liabilities.
Current assets = $30,000 + $55,000 = $85,000
Working capital = $85,000-$50,000 = $35,000

Question 2

Accrued expenses are expenses that ________.

Accepted Answer

B) Accrued expenses are expenses that have been incurred but for which bills have not yet been received. For example, because salespeople at Computer Central Services earn commissions, the company has a liability to those employees after the sale is made - regardless of when a check is issued to the employee.

Question 3

Net sales - cost of goods sold = ________.

Accepted Answer

C) Gross profit is the amount remaining when the cost of goods sold is deducted from net sales. It is also known as gross margin.

Question 4

Which of the following is an example of a current asset?

Accepted Answer

A) Current assets include cash and other items that will or can become cash within the following year. Accounts receivable is a current asset.

Question 5

________ is a statement of a firm's financial position on a particular date and is known as a statement of financial position.

Accepted Answer

B) Balance sheet is a statement of a firm's financial position on a particular date. It is also known as a statement of financial position.

Question 6

Activity ratios analyze ________.

Accepted Answer

A) Activity ratios analyze how well a company is managing and making use of its assets. The inventory turnover ratio and accounts receivable turnover ratio are examples of activity ratios.

Question 7

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

Accepted Answer

B) Current ratio is a measure of a firm's short-term liquidity. It is calculated by dividing current assets by current liabilities.

Question 8

________ is a financial record of a company's revenues,expenses,and profits over a given period of time.

Accepted Answer

B) Income statement is a financial record of a company's revenues, expenses, and profits over a given period of time. It is also known as a profit and loss statement.

Question 9

A firm's current liabilities amount to $30,000.It does not have any marketable securities and receivables amount to $20,000.Calculate the acid-test ratio of the firm if it has $40,000 cash in hand.

Accepted Answer

A) Acid-test ratio is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities. It is a measure of a firm's short-term liquidity.
Acid-test ratio = (cash + marketable securities + receivables)/current liabilities = ($40,000 + 0 + $20,000)/$30,000 = 2.0.

Question 10

Which of the following expenses is classified as accounts payable?

Accepted Answer

A) Accounts payable includes the money the company owes its suppliers as well as money it owes vendors for miscellaneous services (such as electricity and telephone charges).

Question 11

The profit earned or loss incurred by a firm,determined by subtracting expenses from revenues,is referred to as the ________.

Accepted Answer

C) Net income is the profit earned or loss incurred by a firm, determined by subtracting expenses from revenues. It is casually referred to as the bottom line.

Question 12

Which of the following ratios is used to measure a firm's short-term liquidity?

Accepted Answer

C) Quick ratio is a measure of a firm's short-term liquidity. It is calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities.

Question 13

Robex Woodworks is a furniture manufacturer.The company has purchased timber worth $5,000 from one of its suppliers and has not paid them yet.This amount is recorded as ________ in the balance sheet.

Accepted Answer

D) Accounts payable includes the money the company owes its suppliers as well as money it owes vendors for miscellaneous services (such as electricity and telephone charges).

Question 14

Which of the following is an example of an activity ratio?

Accepted Answer

A) Activity ratios analyze how well a company is managing and making use of its assets. The inventory turnover ratio, which measures how fast a company's inventory is turned into sales, is an example of an activity ratio.

Question 15

A U.S.company issues bonds to generate money for expanding its business to China.The company generates a sum of $50,000 in this fashion.This money is an example of a(n)________.

Accepted Answer

B) Long-term liabilities are obligations that fall due more than a year from the date of the balance sheet. Long-term liabilities include loans, leases, and bonds.

Question 16

Which of the following is classified as a general expense?

Accepted Answer

C) General expenses are operating expenses incurred in the overall administration of a business. They include such items as professional services (such as accounting and legal fees), office salaries, depreciation of office equipment, insurance for office operations, and supplies.

Question 17

Expenses incurred through marketing and distributing a product are referred to as ________ expenses.

Accepted Answer

D) Selling expenses are operating expenses incurred through marketing and distributing the product (such as wages or salaries of salespeople, advertising, supplies, insurance for the sales operation, depreciation for the store and sales equipment, and other sales department expenses such as telephone charges).

Question 18

Which of the following statements is true of the order in which assets are listed in the balance sheet?

Accepted Answer

D) In a balance sheet, assets are listed in descending order by liquidity, or the ease with which they can be converted into cash. Thus, current assets are listed before fixed assets.

Question 19

Which of the following is an example of a fixed asset?

Accepted Answer

A) Fixed assets are assets retained for long-term use, such as land, buildings, machinery, and equipment. Transportation equipment is a long-term asset and is typically used for more than one year.

Question 20

Which of the following reports is best suited to analyze an organization's profitability over a period of time?

Accepted Answer

D) The income statement or profit-and-loss statement shows an organization's profit performance over a period of time, typically one year.

Quiz 17: Financial Information and Accounting Concepts