ACG Ch. 2

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Total assets are $160,000, current liabilities are $10,000, long-term liabilities are $40,000, common stock is $50,000, and retained earnings totals $60,000. How much is total stockholders' equity? a) $110,000 b) $120,000 c) $140,000 d) $150,000

a) $110,000

Total assets are $150,000, current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earnings totals $70,000. How much is total stockholders' equity? a) $120,000 b) $150,000 c) $70,000 d) $140,000

a) $120,000

If a company has the ability to pay obligations that are expected to become due within the next year or operating cycle whichever is longer, what is the term that describes this measure? a) Liquidity b) Working capital c) Profitability d) Solvency

a) Liquidity

What is measured by current assets minus current liabilities? a) Working capital b) Profitability c) Solvency d) Cash flow

a) Working capital

Clawson Corporation has current assets of $3,010,000 and current liabilities of 2,150,000. If Clawson Corporation pays $200,000 of its accounts payable what will its new current ratio be? a) 1.40 b) 1.44 c)1.54 d)1.48

b) 1.44

Which of the following does not properly reflect a financial ratio? a) 18.4% b) 7:1 c) $7,200 d) $0.60 per dollar

c) $7,200

Which of these measures is an evaluation of a company's ability to pay current liabilities? a)Earnings per share b)Both earnings per share and current ratio c) Current ratio d)None of these answer choices are correct

c) Current ratio

What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U. S.? a) Generally accepted accounting standards b) Generally accepted auditing principles c) Generally accepted accounting principles d) General accounting principles

c) Generally accepted accounting principles

What are generally accepted accounting principles? a) Usually established by the Internal Revenue Service b) Fundamental truths that can be derived from the laws of nature c) The guidelines used to resolve ethical dilemmas d) A set of accounting rules and practices that have authoritative support

d) A set of accounting rules and practices that have authoritative support

The following ratios are available for Rock Inc. and Pebble Inc. Rock Inc. Pebble Inc. Current Ratio 1.8 2.1 Compared to Rock Inc., Pebble Inc. has a) lower solvency. b) lower liquidity. c) higher solvency. d) higher liquidity.

d) higher liquidity.


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