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1
A) Current assets minus current liabilities. B) Current liabilities minus inventory, divided by current assets. C) Current assets divided by current liabilities. D) Cash on hand divided by current liabilities. E) Current liabilities divided by current assets. 2
A) The quick ratio declines but the current ratio remains unchanged. B) The current ratio goes down if it was greater than 1 before the change. C) The current ratio goes down if it was lower than 1 before the change. D) The quick ratio goes up if it was lower than 1 before the change. E) The quick ratio goes up if it was greater than 1 before the change. 3
A) Sales times net working capital. B) Sales minus net working capital. C) Sales divided by net working capital. D) Net working capital divided by sales. E) Net working capital plus sales. 4
A) The primary reason for using accounting information is the lack of readily available market value information. B) If market value and accounting data conflict, the accounting data should be given precedence. C) Whenever market value information is available, it should be used instead of accounting information. D) In a firm has only current assets and current liabilities, book values will likely be reasonable approximations of market values. E) Very little direct market value information exists for privately held firms and not-for profit businesses. 5
A) Each dollar in assets the firm owns is supported by $2 in equity. B) Each dollar in assets the firm owns is supported by $2 in debt. C) Each dollar in assets the firm owns is supported by $4 in equity. D) Each dollar in equity the firm has supports fifty cents in assets. E) Each dollar in equity the firm has supports $2 in assets. 6
A) If a current asset account and a current liability account both increase by the same amount, there is a net use of funds. B) If a liability account increases and an asset account decreases by the same amount, there is a net source of funds. C) Changes in income and expense accounts do not affect sources and uses of funds. D) If fixed assets decrease by the amount of depreciation for the year, there is a net use of funds. E) If the common stock outstanding increases there is a use of funds. 7
A) $10.00 B) $3.40 C) $6.60 D) $5.28 E) $2.72 8
A) $1.60 B) $1.44 C) $0.30 D) $3.33 E) $1.73 9
A) 9.3% B) 3.9% C) 5.7% D) 6.4% E) 3.6% 10
A) I only B) III only C) I and III only D) I and II only E) I, II and III
2002 McGraw-Hill Higher Education