Multiple-Choice Questions 1. What ratio is used to measure a firms liquidity? a. Debt ratio b. Asset

Question:

Multiple-Choice Questions

1. What ratio is used to measure a firm’s liquidity?

a. Debt ratio

b. Asset turnover

c. Current ratio

d. Return on equity

2. Which of the following transactions could increase a firm’s current ratio?

a. Purchase of inventory for cash

b. Payment of accounts payable

c. Collection of accounts receivable

d. Purchase of temporary investments for cash

3. Total Liabilities/Total Equity equals:

a. Times Interest Earned Ratio

b. Accounts Payable Turnover Ratio

c. Debt-to-Equity Ratio

d. Receivables Turnover Ratio

4. Which of the following ratios is not a debt management ratio?

a. Times interest earned

b. Debt-to-equity ratio

c. Long-term debt-to-equity ratio

d. Return on equity ratio

5. The balance sheet for Parker Inc. at the end of the first year of operations indicates the following:

2009__

Total current assets ...............$600,000

Total investments ............... 85,000

Total property, plant, and equipment ......... 900,000

Current portion of long-term debt ........... 250,000

Total long-term liabilities ............. 350,000

Common stock, $10 par ............. 600,000

Paid-in capital in excess of par—common stock .... 60,000

Retained earnings ................ 325,000

What is the long-term debt to total assets ratio for 2009 (rounded to one decimal place)?

a. 37.9%

b. 40.0%

c. 22.1%

d. 41.7%

6. When analyzing a company’s debt-to-equity ratio, if the ratio has a value that is greater than one, then the company has:

a. Less debt than equity

b. More debt than equity

c. Equal amounts of debt and equity

d. None of these are correct

7. Cost of goods sold divided by average inventory is the formula to compute:

a. Accounts receivable turnover

b. Inventory turnover

c. Gross profit percentage

d. Return on sales percentage

8. A firm’s asset turnover ratio is typically computed as follows:

a. Net Sales/Average Total Assets

b. Gross Profit/Net Sales

c. Operating Income/Net Sales

d. Net Income + [Interest Expense × (1 – Tax Rate)]/Average Total Assets

9. Which of the following ratios is used to measure a firm’s efficiency at using its assets?

a. Current ratio

b. Asset turnover ratio

c. Return on sales ratio

d. Return on equity

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio. Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...