Which one of the following will generate an inflow of cash for a company?

1 point

Increase in prepaid expense

Decrease in accrued expense

Purchase of machineries

Redemption of stocks

None of the above

Debt to asset ratio is also known as Leverage ratio.

1 point

True

False

Any intangible asset with indefinite life time is normally amortized by using straight line method.

2 points

True

False

Receipt of dividend from stocks is a(an)

1 point

Operating Activity

Investing Activity

Financing Activity

Absolute values are better indicators than relative values in interpreting financial statements.

1 point

True

False

The cost of patent is consisting of cost of acquiring and defending it.

2 points

True

False

Calculate the debt to asset ratio by using the following information: Accounts payable $69800, salaries payable $18200, long term debt $196000, cash $16500, accounts receivable $90000, inventory $110000, prepaid expense $25500, long term investment $175000, equipment $225000 and accumulated depreciation for equipment $45000.

2 points

0.25

0.56

0.48

0.33

Payment of interest on notes payable is a(an)

1 point

Operating Activity

Investing Activity

Financing Activity

The difference between current and quick ratio indicates the value of inventories out of the total current assets of a company.

1 point

True

False

Amortization of patent is a(an)

1 point

Operating Activity

Investing Activity

Financing Activity

If the average collection period is 50 days, what would be the receivable turnover?

1 point

6.64

7.30

3.65

None of the above

Which ratio indicates the growth potentials of a company?

1 point

Return on Asset Ratio

Profit Margin Ratio

Price-Earnings Ratio

None of the above

Cash flow statement is prepared based on accrual basis of accounting.

0 points

True or false