Ch. 15 Quiz

Gibson Goods has current assets, including cash and accounts receivable, of $377,000. It owes$190,000 in short-term debt, including trade credit and accounts payable. What is its current ratio?

1.98

Which of the following ratios would be used to determine the size of the dividend that a firm can payshareholders?

Earnings per share

A large property development firm takes out a mortgage on an office complex it owns so that it can purchase raw land upon which it intends to build a shopping mall. This is an example of _______.

Leverage

The ease with which an asset can be converted to cash is known as _______.

Liquidity

_______ accounting serves internal users, whereas _______ accounting serves external users.

Managerial; financial

On a firm's balance sheet, which of the following would be characterized as a fixed asset?

Manufacturing equipment

Which of the following equations would be used to calculate a firm's gross profit?

Revenue - cost of revenues

Funds that flow into a business from the sale of its goods or services are known as _______.

Revenues

Which of the following financial ratios would BEST measure a firm's ability to pay its immediate debts?

Short-term solvency ratio

The three basic financial statements prepared by accountants are the _______.

balance sheet, income statement, and statement of cash flows

Current assets ÷ current liabilities represents a firm's _______.

current ratio

The principle of _______ suggests that accountants and managers should provide not only financial data but also its interpretation and explanations for that data

full disclosure

As a general rule, the _______ a firm's current ratio, the _______ the risk to investors or creditors.

higher; lower

Which of the following financial statements would report whether the firm earned a profit or incurred a loss during a specific period of time?

Income statement

Which of the following would be displayed on a firm's balance sheet?

Assets, liabilities, and owners' equity

Which of the following is the accounting equation?

Assets = Liabilities + Owners' Equity

Generally accepted accounting principles (GAAP) that govern the content and form of financial reports are established by the _______.

Financial Accounting Standards Board (FASB)

In the accounting equation, which of the following would be characterized as a liability?

Grant Industries has a mortgage on its manufacturing facility in the amount of $750,000.

Which of the following is the equation used to determine earnings per share?

Net income ÷ Number of shares of common stock

On a firm's balance sheet, which of the following would be characterized as an intangible asset?

Patents

Heritage Mechanical's balance sheet at the end of the year shows assets of $675,000 and owners' equity of $366,000. Which of the following can be assumed on the basis of this information?

The company has liabilities of $309,000.

Which of the following is the BEST description of cost of goods sold?

The direct costs attributable to the production of the goods sold by a company

Which of the following BEST summarizes the purpose of examining a company's current ratio?

To measure the company's ability to pay immediate debts

An office supply store maintains a supply of paper, toner, pencils and pens, and other items available for sale to customers. On the firm's balance sheet, the inventory would be classified as _______.

a current asset

When LaShandra graduates from medical school next year, she will have accumulated over $200,000 in student loans. If an accountant prepared a personal balance sheet for LaShandra, these student loans would be listed as _______ on the balance sheet.

a long-term liability