Question 1

The current ratio is a measure of liquidity that reflects
A) how many current assets you own free and clear.
B) your debt payments for the current period.
C) how many times you can pay off your current liabilities by using your liquid assets.
D) the portion of your total liabilities that are considered current liabilities.

Accepted Answer

The current ratio calculates the ability of a company to pay off its current liabilities with its current assets. It is calculated by dividing current assets by current liabilities. Therefore, it reflects how many times a company's current liabilities can be paid off by its liquid assets. Option A is incorrect because it doesn't take into account any liabilities. Option B is incorrect because it refers to debt payments, which are not used in calculating the current ratio. Option D is incorrect because it only refers to the portion of total liabilities that are current, which is not the same as the current ratio.

Question 2

Suppose that you wanted to calculate a financial ratio to measure your liquidity.You would most likely use the ________ ratio.
A) debt
B) long-term debt coverage
C) savings
D) current
E) none of the above

Accepted Answer

The current ratio is used to measure liquidity, as it compares a company's current assets to its current liabilities to determine if it can meet its short-term obligations. A higher current ratio indicates better liquidity.

Question 3

Tim and Autumn Davis
Tim and Autumn Davis are trying to figure out their current financial health. They will pay off their car loan in three years, their gross household income is $5,700 per month, and they receive $95 per month in interest income from their investments. They have listed the following items from their most recent statements.
Savings account: $3,200
Checking account: $1,800
Credit card balance: $3,000
Car loan balance: $18,000
Car market value: $15,000
Furniture market value: $4,000
Stocks and bonds: $15,000
-What is their debt ratio?
A) 123 percent
B) 3 times
C) 1.23 times
D) 0.54 percent

Accepted Answer

The answer of Tim and Autumn Davis
Tim and Autumn Davis...

Question 4

Cameron has $17,000 in monetary assets and $4,000 in current liabilities.What is his current ratio?
A) 17,000/4,000
B) .535 times
C) 5 times
D) 13,000/4,000

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. In this case, Cameron's current assets are $17,000 and his current liabilities are $4,000, so the current ratio is 17,000/4,000 = 4.25. Therefore, the best choice is A.

Question 5

Henry currently has $1250 in monetary assets and also has $1250 in current liabilities.What is his current ratio?
A) 1 time
B) 100 percent
C) 1 percent
D) 0

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. In this case, the current assets and current liabilities are equal, so the current ratio is 1:1 or simply 1. A current ratio of less than 1 would indicate a potentially risky financial situation, while a current ratio greater than 1 would suggest a company has more current assets than liabilities and is in a stronger financial position.

Question 6

Your ________ is found by dividing total debt or liabilities by total assets.
A) debt ratio
B) current ratio
C) net worth
D) asset ratio

Accepted Answer

The debt ratio is specifically used to determine the proportion of debt that a company is using to finance its assets. It is calculated by dividing the total debt or liabilities of a company by its total assets. The current ratio compares current assets to current liabilities, the net worth is the difference between assets and liabilities, and the asset ratio is not a commonly used financial ratio.

Question 7

Patty has $9,000 in monetary assets,annual living expenses of $36,000,a $12,000 car loan balance,and $45,000 in equity in her house.What is her month's living expenses covered ratio?
A) 1.125 times
B) 3.75 times
C) 3.0 times
D) There is not enough information to answer this question.

Accepted Answer

Patty's total assets are $54,000 ($9,000 monetary assets + $45,000 equity in her house). Her total debts are $12,000 (car loan balance). Therefore, her net worth is $42,000 ($54,000 - $12,000).

To calculate her month's living expenses covered ratio, we divide her net worth by her annual living expenses:

$42,000 ÷ $36,000 = 1.17

This means that Patty's net worth can cover her living expenses for 1.17 months. Rounding to one decimal place, the answer is 3.0 times (since Patty's net worth can cover her living expenses for just over 3 months). Therefore, the correct answer is choice C.

Question 8

Tim and Autumn Davis
Tim and Autumn Davis are trying to figure out their current financial health. They will pay off their car loan in three years, their gross household income is $5,700 per month, and they receive $95 per month in interest income from their investments. They have listed the following items from their most recent statements.
Savings account: $3,200
Checking account: $1,800
Credit card balance: $3,000
Car loan balance: $18,000
Car market value: $15,000
Furniture market value: $4,000
Stocks and bonds: $15,000
-What is their month's living expenses covered ratio?
A) 2 months
B) 1.23 months
C) 1.75 months
D) Not enough information to answer this question

Accepted Answer

The question does not provide any specific numbers or details regarding the individual's income, savings, or monthly living expenses, making it impossible to calculate the living expenses covered ratio.

Question 9

Alysha has $500 in monetary assets and $5,000 in current liabilities.What is her current ratio?
A) .100 percent
B) .10 times
C) 100 percent
D) 10 times

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Alysha's current ratio is $500 / $5,000 = 0.10 times.

Question 10

Tim and Autumn Davis
Tim and Autumn Davis are trying to figure out their current financial health. They will pay off their car loan in three years, their gross household income is $5,700 per month, and they receive $95 per month in interest income from their investments. They have listed the following items from their most recent statements.
Savings account: $3,200
Checking account: $1,800
Credit card balance: $3,000
Car loan balance: $18,000
Car market value: $15,000
Furniture market value: $4,000
Stocks and bonds: $15,000
-Assuming that they have no current bills other than those that are listed,what is their current ratio?
A) 0.79 times
B) $5,000/$3,000
C) 2 times
D) Not enough information available

Accepted Answer

Current ratio is calculated by dividing current assets by current liabilities. In this case, current assets are $5,000 and current liabilities are $3,000, so the current ratio is:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $5,000 / $3,000
Current Ratio = 1.67 times

Therefore, the best choice is B, which is the calculated current ratio.

Question 11

Hector's month's living expenses covered ratio is 0.25 months.He just broke his leg and will not be able to work for six weeks.Without a paycheck for six weeks,what will Hector most likely experience?
A) He may have to liquidate some of his tangible or investment assets to keep current on his monthly bills.
B) He doesn't have to worry because he has plenty of money in his savings accounts.
C) He may have to borrow some money to keep current on his monthly bills
D) There is not enough information to answer this question.
E) Both A and C are realistic possibilities.

Accepted Answer

With a living expenses covered ratio of only 0.25 months, it is likely that Hector does not have enough savings to cover six weeks of expenses without a paycheck. Therefore, he may have to either liquidate assets or borrow money to keep up with his bills. Both options, as stated in choices A and C, are realistic possibilities.

Question 12

Tim and Autumn Davis
Tim and Autumn Davis are trying to figure out their current financial health. They will pay off their car loan in three years, their gross household income is $5,700 per month, and they receive $95 per month in interest income from their investments. They have listed the following items from their most recent statements.
Savings account: $3,200
Checking account: $1,800
Credit card balance: $3,000
Car loan balance: $18,000
Car market value: $15,000
Furniture market value: $4,000
Stocks and bonds: $15,000
-What is their current net worth?
A) $21,000
B) $39,000
C) $18,000
D) $(21,000)

Accepted Answer

The given option is the only positive net worth among all the options. The rest are either negative or have a lower value.

Question 13

Which of the following would you calculate if you were concerned about your financial resources with regards to unplanned money emergencies?
A) Liability ratio
B) Debt ratio
C) Long-term debt coverage ratio
D) Current ratio
E) None of the above

Accepted Answer

The current ratio is a financial ratio that calculates a company's ability to pay back its short-term liabilities with its short-term assets. In this case, if you are concerned about your financial resources with regards to unplanned money emergencies, calculating your current ratio would give you an idea of whether you have enough short-term assets (cash, savings, etc.) to cover any unexpected expenses that may arise.

Question 14

If the people below,with their respective current ratios,were to lose their jobs today,which one would have more time and more choices until he or she found another job?
A) Christy has a current ratio of 0.85 times.
B) Rick has a current ratio of 2.5 times.
C) Andrew has a current ratio of 1 time.
D) There is not enough information to answer this question.

Accepted Answer

Current ratio is a measure of a company's ability to pay its current liabilities using its current assets. A higher current ratio indicates a company has more current assets to meet its immediate obligations. Therefore, Rick with a current ratio of 2.5 times would have more time and choices until he found another job as he has more resources available to him in case of job loss.

Question 15

Kareem has $6000 in monetary assets and $2000 in current liabilities.What is his current ratio?
A) 2,000/6,000
B) .334 times
C) 6,000/2,000
D) 3 times
E) Both C and D are correct.

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. In this case, it's $6,000 / $2,000 = 3. Therefore, both C (the formula) and D (the numerical answer) are correct.

Question 16

Your ________ is found by dividing monetary assets by current liabilities and is a good measure of liquidity.
A) debt ratio
B) current ratio
C) net worth
D) net cash flows

Accepted Answer

The current ratio is found by dividing monetary assets (current assets) by current liabilities. This ratio measures a company's ability to pay off its current liabilities with its current assets, making it a good measure of liquidity.

Question 17

Below are several people and their current ratios.If they were to lose their jobs today,which one would probably experience financial stress and pressures the quickest?
A) Elmo has a current ratio of 0.5 times.
B) Andy has a current ratio of 2.1 times.
C) Dee has a current ratio of 1 time.
D) There is not enough information to answer this question.

Accepted Answer

Elmo's current ratio of 0.5 times indicates that his current assets are only half of his current liabilities. This means that he may have trouble paying his short-term debts if he were to lose his job, leading to financial stress and pressures. Andy and Dee both have ratios that indicate they can cover their short-term debts with their current assets, so they may not experience financial stress as quickly as Elmo. There is enough information provided to make a determination.

Question 18

Jorge has a debt ratio of 37 percent and Jose has a ratio of 102 percent.They both have the same take-home pay every month.How can we describe their current financial situation?
A) Jorge is currently solvent.
B) Jose is currently insolvent.
C) Jorge probably has more money available to enjoy every month.
D) Jose probably doesn't have much money available to enjoy every month.
E) All of the above

Accepted Answer

Jorge's debt ratio of 37 percent indicates he owes less than he owns, suggesting solvency, while Jose's 102 percent debt ratio suggests he owes more than he owns, indicating insolvency. Given the same take-home pay, Jorge likely has more disposable income after debt payments than Jose, who may have less money available for discretionary spending.

Question 19

Sarah has $15,000 in monetary assets,$48,000 in annual living expenses,a $20,000 balance on her car loan,and $60,000 of equity in her house.What is her month's living expenses covered ratio?
A) 1.125 times
B) 3.75 times
C) 3.0 times
D) There is not enough information to answer this question.

Accepted Answer

The answer of Sarah has $15,000 in monetary assets,$48,000 in...

Question 20

Suppose that you were trying to determine how much income was available for future monetary needs as well as for investments.Which of the following ratios would you most likely use?
A) Current ratio
B) Debt ratio
C) Savings ratio
D) Total asset turnover
E) None of the above

Accepted Answer

The savings ratio is the percentage of income that is saved rather than spent. By using this ratio, we can determine how much income is available for future monetary needs as well as for investments.

Quiz 2: Measuring Your Financial Health and Making a Plan

The current ratio is a measure of liquidity that reflects

Suppose that you wanted to calculate a financial ratio to measure your liquidity.You would most likely use the ________ ratio.

Cameron has $17,000 in monetary assets and $4,000 in current liabilities.What is his current ratio?

Henry currently has $1250 in monetary assets and also has $1250 in current liabilities.What is his current ratio?

Your ________ is found by dividing total debt or liabilities by total assets.

Patty has $9,000 in monetary assets,annual living expenses of $36,000,a $12,000 car loan balance,and $45,000 in equity in her house.What is her month's living expenses covered ratio?

Alysha has $500 in monetary assets and $5,000 in current liabilities.What is her current ratio?

Hector's month's living expenses covered ratio is 0.25 months.He just broke his leg and will not be able to work for six weeks.Without a paycheck for six weeks,what will Hector most likely experience?

Which of the following would you calculate if you were concerned about your financial resources with regards to unplanned money emergencies?

If the people below,with their respective current ratios,were to lose their jobs today,which one would have more time and more choices until he or she found another job?

Kareem has $6000 in monetary assets and $2000 in current liabilities.What is his current ratio?

Your ________ is found by dividing monetary assets by current liabilities and is a good measure of liquidity.

Below are several people and their current ratios.If they were to lose their jobs today,which one would probably experience financial stress and pressures the quickest?

Jorge has a debt ratio of 37 percent and Jose has a ratio of 102 percent.They both have the same take-home pay every month.How can we describe their current financial situation?

Sarah has $15,000 in monetary assets,$48,000 in annual living expenses,a $20,000 balance on her car loan,and $60,000 of equity in her house.What is her month's living expenses covered ratio?

Suppose that you were trying to determine how much income was available for future monetary needs as well as for investments.Which of the following ratios would you most likely use?