166.A weakness of the current ratio is

a.the difficulty of the calculation.

b.it uses year-end balances of current asset and current liability accounts.

c.it is rarely used by sophisticated analysts.

d.it can be expressed as a percentage, as a rate, or as a proportion.

167.A supplier to a company would be most interested in the

a.asset turnover ratio.

b.profit margin ratio.

c.current ratio.

d.earnings per share.

168.Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

a.Current ratio.

b.Inventory turnover ratio.

c.Asset turnover ratio.

d.Receivables turnover ratio.

169.Ratios are used as tools in financial analysis

a.instead of horizontal and vertical analyses.

b.because they can provide information that may not be apparent from inspection of the individual components of the financial statements.

c.because even single ratios by themselves are quite meaningful.

d.because they are prescribed by GAAP.

170.The ratios that are used to determine a company's short-term debt paying ability are

a.asset turnover, times interest earned, current ratio, and receivables turnover.

b.times interest earned, inventory turnover, current ratio, and receivables turnover.

c.times interest earned, receivables turnover ratio, current ratio, and inventory turnover.

d.current ratio, current debt coverage ratio, receivables turnover, and inventory turnover.

171.Hunt Company had $250,000 of current assets and $90,000 of current liabilities before borrowing $60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Hunt Company's current ratio?

a.The ratio remained unchanged.

b.The change in the current ratio cannot be determined.

c.The ratio decreased.

d.The ratio increased.

172.A liquidity ratio measures the

a.income or operating success of an enterprise over a period of time.

b.ability of the enterprise to survive over a long period of time.

c.short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash.

d.number of times interest is earned.

173.If equal amounts are added to the numerator and the denominator of the current ratio and the ratio is over one, the ratio will always

a.increase.

b.decrease.

c.stay the same.

d.equal zero.

174.If a company has a current ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio?

Short-term BorrowingCollection of Receivable

a.IncreaseNo effect

b.IncreaseIncrease

c.DecreaseNo effect

d.DecreaseDecrease

175.A company has a receivables turnover ratio of 10. The average net receivables during the period are $600,000. What is the amount of net credit sales for the period?

a.$60,000.

b.$6,000,000.

c.$720,000.

d.Cannot be determined from the information given.