BA 100

Total liabilities divided by total assets will yield the ________ ratio.

debt to assets

Which of the following is a leverage ratio?

debt to equity ratio

________ is an accounting procedure for systematically spreading the cost of a tangible asset over its estimated useful life.

depreciation

A company that is highly leveraged is considered to have

high debt

The ________ is a financial record that represents a company's revenues, expenses, and profits over a given period of time, typically one year.

income statement

Short-term financing is financing that will typically be repaid within

one year

The accounts receivable turnover ratio is calculated by dividing sales by the average value of accounts receivable for a period.

true

Leverage ratios indicate ________.

a firm's ability to pay its long-term obligations

Capital structure is

a firm's mix of debt and equity financing

The purchase of a good or service that has not yet been paid for is recorded in ________ on the balance sheet.

accounts payable

________ ratio is calculated by dividing current assets by current liabilities.

current

True or False// Accounts payable is an example of a long-term liability.

false

True or False// Working capital refers to the amount of cash an organization has in hand.

false

True or False//Quick ratio is a measure of a firm's long-term liquidity.

false

Net sales - cost of goods sold =

gross profit

Which of the following is a type of activity ratio?

inventory turnover ratio

Assets - Liabilities =

owner's equity

Which of the following ratio is considered to be a better indicator of a firm's ability to pay creditor because it leaves out inventories?

quick ratio

A reduction in a manufacturer's inventory turnover ratio is likely to indicate that the ________.

sales are slowing down

Equity financing refers to arranging funding by

selling ownership shares

True or False// Balance sheet presents a firm's financial position on a particular date.

true

True or False// Net income refers to profit earned or loss incurred by a firm.

true

Which of the following is a major difference between debt financing and equity financing?

Repayment of debt financing is not linked to organizational performance, unlike equity financing.