11.Select the
incorrect
statement regarding ratio analysis.
A. Ratio analysis is a specific form of horizontal analysis.
B. There are many different ratios available for evaluating a firm's performance.
C. Some ratios involve an account from the balance sheet and one from the income statement.
D. Ratio analysis involves making comparisons between different accounts in the same set of financial statements.
12.Which of the following is/are objective(s) of ratio analysis?
A. Assessing past performance.
B. Assessing the prospects for future performance.
C. Analyzing how a company finances its operations.
D. All of these answers are correct.
13.Financial ratios can be used to assess which of the following aspects of a firm's performance?
A. Liquidity
B. Solvency
C. Profitability
D. All of these answers are correct.
14.All of the following are considered to be measures of a company's short-term debt-paying ability
except:
A. Current ratio.
B. Earnings per share.
C. Inventory turnover.
D. Average collection period.
15.Rialto Company collected $5,000 on account. What impact will this transaction have on the firm's current ratio?
A. No impact
B. Increase it
C. Decrease it
D. Not enough information is provided to answer the question.
16.Knoell Company paid its sales employees $15,000 in sales commissions. What impact will this transaction have on the firm's working capital?
A. No impact
B. Increase it
C. Decrease it
D. Not enough information is provided to answer the question.
17.Working capital is defined as:
A. Current assets divided by current liabilities.
B. Total assets minus total liabilities.
C. Current assets less current liabilities.
D. Current liabilities divided by total liabilities.
18.Select the
incorrect
statement regarding the quick ratio:
A. The quick ratio is also known as the acid-test ratio.
B. The quick ratio ignores some current assets that are less liquid than others.
C. The quick ratio is a conservative variation of the current ratio.
D. The quick ratio equals quick assets divided by total liabilities.
19.Darden Company has cash of $40,000, accounts receivable of $60,000, inventory of $32,000, and equipment of $100,000. Assuming current liabilities of $48,000, this company's working capital is:
A. $12,000.
B. $52,000.
C. $144,000.
D. $84,000.
20.Milton Company has total current assets of $46,000, including inventory of $10,000, and current liabilities of $20,000. The company's current ratio is:
A. 0.4.
B. 1.8.
C. 2.8.
D. 2.3.