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| 1 | |
Which of the following statements concerning the current accounts are correct?
I. Accrued expenses are current liabilities.
II. A current liability requires payment within the shorter of one year or the operating cycle.
III. Prepayments and deferred charges are current assets.
IV. Marketable securities are current assets. |
| | A) | I and II only |
| | B) | III and IV only |
| | C) | I, II, and III only |
| | D) | I, II, and IV only |
| | E) | I, III, and IV only |
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| 2 | |
Which one of the following equations is correct? |
| | A) | Net working capital = Long-term debt + Equity + Fixed assets. |
| | B) | Cash + Other current assets = Long-term debt − Current liabilities + Equity − Fixed assets. |
| | C) | Net working capital + Cash = Other current assets − Current liabilities. |
| | D) | Cash = Long-term debt + Equity − Fixed assets. |
| | E) | Cash = Long-term debt + Equity − Net working capital (excluding cash) − Fixed assets. |
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| 3 | |
Which one of the following activities will increase cash? |
| | A) | decreasing long-term debt |
| | B) | increasing accounts receivable |
| | C) | decreasing fixed assets |
| | D) | decreasing current liabilities |
| | E) | increasing marketable securities |
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| 4 | |
Which one of the following is a source of cash? |
| | A) | payment of a $15,000 dividend |
| | B) | investment of $20,000 in inventory |
| | C) | borrowing $10,000 from a supplier |
| | D) | granting of $1,500 credit to a customer for a sale |
| | E) | buying a $3,000 computer for the firm's office manager |
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| 5 | |
Which one of the following is a source of cash? |
| | A) | paying off a mortgage |
| | B) | reducing accounts receivable |
| | C) | decreasing accounts payable |
| | D) | investing in a marketable security |
| | E) | increasing prepayments |
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| 6 | |
An increase in which one of the following is a use of cash? |
| | A) | notes payable |
| | B) | common stock |
| | C) | taxes payable |
| | D) | retained earnings |
| | E) | intangibles |
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| 7 | |
Which one of the following statements is true concerning the operating cycle? |
| | A) | The inventory period ends when the receivable is collected. |
| | B) | The length of the operating cycle is always greater than or equal to the length of the cash cycle. |
| | C) | The accounts receivable period is always greater than or equal to the length of the cash cycle. |
| | D) | The inventory period plus the accounts receivable period is equal to the operating cycle plus the cash cycle. |
| | E) | The accounts payable period ends when inventory is sold. |
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| 8 | |
The length of time between the arrival date of inventory and the date when cash is collected for the sale of that inventory is called the: |
| | A) | inventory period. |
| | B) | accounts receivable period. |
| | C) | accounts payable period. |
| | D) | cash cycle. |
| | E) | operating cycle. |
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| 9 | |
The cash cycle is the time period between the date when inventory is: |
| | A) | received and when it is actually paid for. |
| | B) | paid for and when the cash is collected from its sale. |
| | C) | received and the date when cash is received for the sale. |
| | D) | paid for and when it is sold. |
| | E) | received and when it is actually sold. |
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| 10 | |
Which one of the following will increase the length of the cash cycle? |
| | A) | increasing the inventory turnover rate |
| | B) | decreasing the accounts receivable period |
| | C) | decreasing the accounts payable period |
| | D) | increasing the accounts receivable turnover rate |
| | E) | decreasing the accounts payable turnover rate |
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