QUESTION 1

1. If a firm uses part of the cash it received from payment of an account receivable to buy inventory and leaves the rest in its bank account, its current ratio will remain unchanged.

   True

   False

QUESTION 2

1. Calculate the current ratio given the following information: current liabilities = $54,000; sales = $250,000; cost of goods sold = $120,000; cash ratio = 0.82; accounts receivable turnover = 6.25; inventory turnover = 1.9.

   Do not round earlier steps, and state your answer correct to 2 decimal places.

QUESTION 3

1. When comparing the financial statements of one firm with those of another firm, a problem that may be encountered is that the two firms may be seasonal in nature and have different fiscal year ends.

   True

   False

QUESTION 4

1. Determine the value of cash given the following information: cash ratio = 1.5; cash equivalents = $ 750 ; current liabilities = $ 800.