Ch 2

Which of the following is not classified properly as a current asset? 1) supplies 2) debt investments 3) a fund to be used to purchase building within the next year 4) a receivable from the sale of an asset of the collected in two years

a receivable from the sale of an asset of the collected in two years

It is not true that current assets are resources that are expected to be 1) referred in cash within one year 2) sold within one year 3) consumed within one year 4) acquired within one year

acquired within one year

Which of the following would not be classified as a long term liability? 1) current maturities of long term debit 2)bonds payable 3) mortgage payable 4) lease liabilities

current maturities of long term debit

The most important information needed to determine if companies can pay their current obligations is the 1) Net income for the year 2) projected income for the next year 3) relationship between current assets and current liabilities 4) relationship between short term and long term liabilities

relationship between current assets and current liabilities

The operating cycle of a company is the average time that is required to go from cash to 1) sales in producing revenues 2) cash in producing revenues 3) inventory in producing revenues 4) accounts receivable in producing revenues

cash in producing revenues

The current ratio is 1) current assets plus current liabilities 2) current assets minus current liabilities 3) current assets divided by current liabilities 4) current assets times current liabilities

current assets divided by current liabilities

Working capital is calculated by taking 1) current assets plus current liabilities 2) current assets minus current liabilities 3) current assets divided by current liabilities 4) current assets times current liabilities

current assets minus current liabilities

In a classified balance sheet, assets are usually classified as 1) current assets, long term assets, property, plant and equipment, and intangible assets 2) current assets, long term investments, property, plant and equipment, and common stocks 3) current assets, long term investments, tangible assets, and intangible assets 4) current assets, long term investments, property, plant and equipment, and intangible assets

current assets, long term investments, property, plant and equipment, and intangible assets

The debt to assets ratio is 1) liquidility ratio 2) profitability ratio 3) solvency ratio 4) none of the answer choices is correct

solvency ratio

Which of the following is not considered a measure of liquidity? 1) current ratio 2) working capital 3) debit assets ratio 4) solvency measure

debit assets ratio

A useful measure of solvency in the 1) current ratio 2) earnings per share 3) return on assets ratio 4) debt to assets ratio

debt to assets ratio

An intangible asset 1) derives its value from the rights and privileges it provides the owner 2) is worthless because it has no physical substance 3) is converted into a tangible asset during the operating cycle 4) cannot be classified on the balance sheet becuase it lacks physical substance

derives its value from the rights and privileges it provides the owner

Which of the following is not considered an asset? 1) equipment 2) dividends 3) accounts receivable 4) inventory

dividends

A current asset is 1) the last asset purchased by a business 2) an asset which currently being used to produce a product service 3) usually found as a seperate classification in the income statement 4) expected to be converted to cash or used in the business within a relatively short time period

expected to be converted to cash or used in the business within a relatively short time period

The debt to assets ratio is computed by dividing 1) long term liabilities by total assets 2) long term liabilites by average assets 3) total liabilities by total assets 4) toal liabilities by average assets

total liabilities by total assets

Trademarks would appear in which balance sheet section? 1) intangible assets 2) investments 3) property, plant, and equipment 3) current assets

intangible assets

Free cash is net cash provided by operating activities 1) less capital expenditures 2) less cash dividends 3) less capital expenditures and cash dividends 4) less capital expenditures and salaries expense

less capital expenditures and cash dividends

The ability of a business to pay obligations that are expected to become due within the next year or operating cycle is 1) leverage 2) liquidility 3) profitability 4) wealth

liquidity

The relationship between current assets and current liabilities is important is evaluating a company's 1) profitability 2) liquidity 3) market value 4) solvency

liquidity

Working capital is a measure of 1) consistancy 2) liquidility 3) profitability 4) solvency

liquidity

Long-term creditors are usually most interested in evaluating 1) liquidity and profitability 2) consistency and profitability 3) liquidity and solvency 4) consistency and solvency

liquidity and solvency

Intangible assets are 1) listed directly under current assets on the balance sheet 2) not listed on the balance sheet because they do not have physical substance 3) listed after property, plant and equipment 4) listed on a long term investment on the balance sheet

listed after property, plant and equipment

Ratios that measure the income or operating success of a company for a given period of time are 1) liquidility ratios 2) profitability ratios 3) solvency ratios 4) trending ratios

profitability ratios

Equipment is classified on the balance sheet as 1) a current asset 2) property, plant and equipment 3) an intangible asset 4) a long term investment

property, plant and equipment .,

Working capital is 1) calculated by dividing current assets by current liabilities 2) used to evaluate a company's liquidity and short term debt paying ability 3) used to evaluate a company's solvency and long term debt paying ability 4) calculated by subtracting current assets from current liabilities

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