ACCT207 Exam 1 Chpt 2

The relationship between current assets and current liabilities is important in evaluating a company's

liquidity

Which of the following is a measure of liquidity?

working capital and current ratio

Which of the following is generally not classified as a current liability? -Salaries and Wages Payable -Accounts Payable -Taxes Payable -Bonds Payable

Bonds Payable

Current Ratio Formula

Current Assets / Current Liabilities

Which of the following is not considered a measure of liquidity?

Debt to Asset Ratio

What is common stock (capital stock)

The amount invested by owners at the time the shares were issued

A liability is classified as a current liability if it is to be paid within the coming year. (T/F)

True

Earnings per share measures the net income available on each share of common stock (T/F)

True

Stockholders' equity is divided into two parts: common stock and retained earnings. (T/F)

True

It is not true that current assets are resources that are expected to be... -realized in cash within one year. -sold within one year. -consumed within one year. -acquired within one year.

acquired within one year

current assets are resources that are expected to be

converted to cash or used up in business within one year/ one operating cycle

On a classified balance sheet, short-term investments are classified as

current assets

Liabilities are generally classified on a balance sheet as

current liabilities and long-term liabilities.

On a classified balance sheet, companies usually list current assets

in the order in which they are expected to be converted into cash. (liquidity)

The agency of the United States Government that oversees the U.S. financial markets is the

security exchange commission

Long-term creditors are usually most interested in evaluating.. -liquidity. -profitability. -solvency. -consistency.

solvency

Long-term creditors are usually most interested in evaluating.... -liquidity. -profitability. -solvency. -consistency.

solvency

The debt to assets ratio is a

solvency ratio

The debt to assets ratio is computed by dividing

total liabilities by total assets.

Cash and supplies are both classified as current assets. (T/F)

true

The excess of current assets over current liabilities is called working capital. (T/F)

true

Working capital is

used to evaluate a company's liquidity and short-term debt paying ability.