1. Analysis of a firms balance sheet provides information on its liquidity, which is the ability to a. satisfy short-term obligations. b. maintain profitable operations. c. maintain past levels of preferred and common dividends. d. survive a major economic downturn.

2. In order for a liability to exist, a. there must be a past transaction or event. b. the exact amount must be known. c. the identity of the party to whom the liability is owed must be known. d. there must be an obligation to pay cash in the future.

3. Accrued revenues would normally appear on the balance sheet as a. plant assets. b. current liabilities. c. long-term liabilities. d. current assets.

4. Which of the following would NOT be classified as a current asset on a classified balance sheet? a. Investment securities (trading) b. Short-term investments c. Intangible assets d. Prepaid expenses

5. The correct order to present current assets is a. cash, inventories, prepaid items, accounts receivable. b. cash, inventories, accounts receivable, prepaid items. c. cash, accounts receivable, prepaid items, inventories. d. cash, accounts receivable, inventories, prepaid items.

6. Unearned rent would normally appear on the balance sheet as a a. plant asset. b. current liability. c. long-term liability. d. current asset.

7. Investment securities held for the purpose of retiring bonds should be classified on a balance sheet as a. investments. b. current assets. c. deferred bond liability. d. intangible assets.

8. Which of the following is NOT a long-term investment? a. Stock held to exert influence on another company b. Land held for speculation c. Trademarks d. Cash surrender value of life insurance

9. Which of the following characteristics may result in the classification of a liability being changed from current to noncurrent?

a. Violation of a subjective acceleration clause b. Violation of an objective acceleration clause c. A demand provision for payment d. Refinancing after the balance sheet date

10. Which of the following characteristics may result in the classification of a liability as current?

a. Short-term obligations expected to be refinanced with long-term debt b. Debts to be liquidated from funds that have been accumulated and are reported as noncurrent assets c. Violation of provisions of a debt agreement d. Obligations for advance collections that involve long-term deferment of the delivery of goods or services