Accounting, ACCT 281 Chapter 14

The Plaza Company has working capital of $540,000 and a current ratio of 3 to 1. The amount of current assets is:

$810,000

Generally speaking, which appears to be a desirable current ratio?

2 to 1.

Amalgamated Corporation's net income was $2,400,000 in 2017 and $800,000 in 2018. What percentage increase in net income must Amalgamated achieve in 2019 to offset the decline in profits in 2018?

300%

A high quality of earnings is indicated by:

A history of increasing earnings and conservative accounting methods.

Which of the following is considered a quick asset?

Accounts receivable.

The measures most often used in evaluating solvency- the current ratio, quick ratio, and amount of working capital--are developed from amounts appearing in the:

Balanced Sheet

The principle factor(s) affecting the quality of working capital is (are):

Both the nature of the current assets and the length of time to convert current assets into cash.

The quick ratio:

Cannot be higher than the current ratio.

Quick assets include which of the following?

Cash, marketable securities, and receivables.

Assume that net sales are increasing faster than the rate of inflation, and the company's gross profit rate rising. Of the following, the most logical conclusion is that:

Demand for the company's products is very strong.

The current ratio will be _______________ the quick ratio.

Greater than or equal to

An organization that provides ratings of corporate governance services is:

ISS.

Component percentages indicate the relative size of each item included in a total. Which of the following statements is true?

Income statement items are expressed as a percentage of net sales, while balance sheet items are expressed as a percentage of total assets.

Short-term creditors are most likely to use the quick ratio instead of the current ratio in evaluating the solvency of a company with large, slow-moving:

Inventories

The price-earnings ratio is measured by dividing:

Market value by earnings per share.

The return on assets ratio usually is computed as:

Operating income divided by average total assets.

A comparative financial statement:

Places two or more years of a financial statement side-by-side in order to compare results.

In order for investors and creditors to decide whether to invest in a company or loan a company funds they should do all of the following except:

Rely on assurances of reliability by the company's leaders.

The financial ratio intended to measure the effectiveness with which management has utilized the resources of the business, regardless of how these resources are financed, is:

Return on assets.

Which of the following is a measure of profitability?

Return on assets.

In a multiple-step income statement, interest expense usually is not classified as an operating expense because interest charges:

Stem from the manner in which assets are financed, not the manner in which they are used in business operations.

In evaluating the quality of company's earning, which of the following factors is least important?

The dollar amount of earnings per share

The gross profit rate represents:

The percentage of sales revenue remaining after providing for the cost of the merchandise sold.

The debt ratio indicates the percentage of:

Total assets financed by creditors.

The excess of current assets over current liabilities is called:

Working Capital.