212 Chapter 4 Understanding Fnancial Stataments LO3 11. The following data appear in the financial statements of a company. Cakculate its current ratio. Current assets Current liablities. $10,000 $5,000 a 2:1 b. 12 c $5,000 d. ($5,000) LOS 12. The fodlowing data pertains to Smith Consulting, Inc. for 2013, Compute its ending retained carning Beginning-of-year retained eamings Net income Dividends paid $120.000 7,500 5,000 a $157.500 b. $152.500 c $162,500 d. $115,000 02 13. A merchandising company's multi-step income statement dimirs from that oi service company in what way a. There is no difference. b. A service company does not inclade a line for cost of goods sold c. A service company has a line for selling expenses whereas a merchandising company does not. d. A merchandising company will have a line for income from operations whercas a service company will not QUESTIONS 1. List three subgroups of assets that may be found in the asset section of a classified balance sheet. 2. Define currens asset and normal operaring cycle a. Which of the following are current assets: land. cash, prepaid expense, building, accounts receivable, in ventory, equipment? 4. What is mcunt by corporate sacial responsibility? 5. Define the foll 6. What is meant by socially responsible investing? 7. Which of the following measures are best computed using a classified balance sheet? lowing ratios: current ratio, debt-to-total-assets ratio, and return on sales ratio. a. Liquidity b. Solvency c. Free cash flow Both a. and b. d. Which of the following is a correct statement? a. The current ratio is a measure of firm sol b. The current ratio is a mcasure of firm liquidity e The debt-to-total-assets ratio is a measure of firm liquidity d. None of the above is correct 8. ency 9. Free cash flow is measured using information from which financial statement? Balance sheet b. Income statement e Statement of cash flows d. Statement of retained eanings 10. Socially responsible investing a. Means making as much money on your investments as you can as your only goal. b. Means investing in companies that adhere to environmental and social policies in their operations c. Is too small of a concept to matter much