Question 1

Which of the following is not included in the computation of the quick ratio?

Accepted Answer

The quick ratio, also known as the acid-test ratio, is a measure of a company’s ability to meet its short-term liabilities with its most liquid assets. It includes only assets that can be easily converted into cash, such as cash, marketable securities, and accounts receivable. Inventory is not included in the quick ratio because it cannot be quickly converted into cash.

Question 2

Based on the following data for the current year, what is the number of days' sales in accounts receivable?

Accepted Answer

The answer of Based on the following data for the...

Question 3

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

Accepted Answer

The ratio of fixed assets to long-term liabilities, also called the fixed charge coverage ratio, measures the ability of a company to meet its long-term obligations through the income generated by its fixed assets. This ratio is important for bondholders as it shows the margin of safety they have in the event of a default. A higher ratio indicates more security for bondholders and a better ability of the business to borrow additional funds on a long-term basis.

Question 4

The number of times interest expense is earned is computed as

Accepted Answer

The number of times interest expense is earned, also known as the interest coverage ratio, is calculated by dividing income before income tax plus interest expense by interest expense. This measures how easily a company can pay interest on its outstanding debt.

Question 5

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

Accepted Answer

Accounts receivable turnover ratio measures how many times during a year a company collects its average account receivable balance. If a company accelerates the collection of receivables, it means that it is collecting its receivables more quickly than before. This will result in a decrease in the average accounts receivable balance and an increase in the accounts receivable turnover ratio. Therefore, the correct answer is option D, increase.

Question 6

Based on the above data, what is the amount of quick assets?

Accepted Answer

The answer of  Based on the above data, what...

Question 7

Based on the above data, what is the quick ratio, rounded to one decimal point?

Accepted Answer

The answer of  Based on the above data, what...

Question 8

The numerator used to calculate accounts receivable turnover is

Accepted Answer

The answer of The numerator used to calculate accounts receivable...

Question 9

The current ratio is

Accepted Answer

The current ratio is a liquidity measure that evaluates a company's ability to pay its short-term debts using its current assets. It is calculated by dividing current assets by current liabilities.

Question 10

Based on the following data for the current year, what is the inventory turnover?

Accepted Answer

The answer of Based on the following data for the...

Question 11

Balance sheet and income statement data indicate the following:  Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point)?

Accepted Answer

To calculate the number of times bond interest charges were earned, we need to use the "earnings before interest and taxes (EBIT)" figure from the income statement divided by "bond interest charges" figure from the balance sheet. So, the calculation would be:

EBIT / Bond interest charges
= 20,000 / 4,444
= 4.5

Therefore, the number of times bond interest charges were earned is 4.5, which is closest to option C: 4.5.

Question 12

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

Accepted Answer

The answer of A company with $70,000 in current assets...

Question 13

Based on the following data for the current year, what is the accounts receivable turnover?

Accepted Answer

The answer of Based on the following data for the...

Question 14

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

Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets.

Current assets = $326,000 
Current liabilities = $213,000 + $0 + $0 = $213,000

Working capital = $326,000 - $213,000 = $113,000

Therefore, the amount of working capital is $113,000, which corresponds to Choice B.

Question 15

Based on the above data, what is the quick ratio, rounded to one decimal point?

Accepted Answer

The answer of  Based on the above data, what...

Question 16

The following information pertains to Brock Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.   What is the current ratio for this company?

Accepted Answer

Current Ratio = Current Assets / Current Liabilities
Current Assets = 20,000 + 100,000 + 30,000 = 150,000
Current Liabilities = 60,000 + 20,000 = 80,000
Current Ratio = 150,000 / 80,000 = 1.875 or 1.58 rounded to two decimal places. Therefore, the answer is C.

Question 17

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

Accepted Answer

The answer of A company with working capital of $720,000...

Question 18

Based on the following data for the current year, what is the number of days' sales in inventory?

Accepted Answer

The answer of Based on the following data for the...

Question 19

Which of the following measures a company's ability to pay its current liabilities?

Accepted Answer

Current ratio measures a company's ability to pay its current liabilities with its current assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates that the company is better equipped to meet its short-term obligations.

Question 20

Hsu Company reported the following on its income statement:  An analysis of the income statement revealed that interest expense was $80,000. Hsu Company's times interest earned was

Accepted Answer

Times Interest Earned = (Operating Income + Interest Expense)/Interest Expense
= (600,000 + 80,000)/80,000
= 7.5 times
Therefore, the closest option is B, which is 6.25 times.

Quiz 17: Financial Statement Analysis

Which of the following is not included in the computation of the quick ratio?

Based on the following data for the current year, what is the number of days' sales in accounts receivable?

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

The number of times interest expense is earned is computed as

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

Based on the above data, what is the amount of quick assets?

Based on the above data, what is the quick ratio, rounded to one decimal point?

The numerator used to calculate accounts receivable turnover is

The current ratio is

Based on the following data for the current year, what is the inventory turnover?

Balance sheet and income statement data indicate the following: Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point) ?

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

Based on the following data for the current year, what is the accounts receivable turnover?

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

Based on the above data, what is the quick ratio, rounded to one decimal point?

The following information pertains to Brock Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the current ratio for this company?

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

Based on the following data for the current year, what is the number of days' sales in inventory?

Which of the following measures a company's ability to pay its current liabilities?

Hsu Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $80,000. Hsu Company's times interest earned was