16) Which of the following does the current ratio measure?
A) The company's overall ability to pay liabilities
B) The company's ability to pay current liabilities with current assets
C) The proportion of the company's assets that are financed with debt
D) The company's rate of cash flow
17) Which of the following does the debt ratio measure?
A) The company's overall ability to pay its liabilities
B) The company's ability to pay current liabilities with current assets
C) The proportion of the company's assets that are financed with equity
D) The company's ability to invest in growth
18) Which of the following statements is an accurate interpretation of a debt ratio of .60?
A) The company has $.60 of current liabilities for every $1.00 of current assets.
B) The company has $.60 of assets for every $1.00 of liabilities.
C) The company has $.60 of current assets for every $1.00 of current liabilities.
D) The company has $.60 of liabilities for every $1.00 of assets.
19) The following contains information from the records of the Wellborn Engineers and Architects, PC:
Wellborn Engineers and Architects, PC
Selected Financial Information
December 31, 2013
Current assets
|
$74,000
|
Current liabilities
|
44,000
|
Long-term assets
|
95,000
|
Long-term liabilities
|
60,000
|
Total revenues
|
50,000
|
Total expenses
|
30,000
|
What is the current ratio?
A) 1.58
B) 2.32
C) 0.59
D) 1.68
20) The following contains information from the records of the Wellborn Engineers and Architects, PC:
Wellborn Engineers and Architects, PC
Selected Financial Information
December 31, 2013
Current assets
|
$74,000
|
Current liabilities
|
44,000
|
Long-term assets
|
95,000
|
Long-term liabilities
|
60,000
|
Total revenues
|
50,000
|
Total expenses
|
30,000
|
What is the debt ratio?
A) 1.62
B) 0.62
C) 1.67
D) 3.84
21) The following contains information from the records of the Wellborn Engineers and Architects, PC:
Wellborn Engineers and Architects, PC
Selected Financial Information
December 31, 2013
Current assets
|
$74,000
|
Current liabilities
|
44,000
|
Long-term assets
|
95,000
|
Long-term liabilities
|
60,000
|
Total revenues
|
50,000
|
Total expenses
|
30,000
|
Which of the following statements is an accurate interpretation of Wellborn Engineers and Architects', PC current ratio?
A) The company has $2.32 of current assets for every $1.00 of liabilities.
B) The company has $1.68 of current assets for every $1.00 of current liabilities.
C) The company has $1.58 of current assets for every $1.00 of liabilities.
D) The company has $0.59 of current assets for every $1.00 of current liabilities.
22) Which of the following statements is an accurate interpretation of the debt ratio?
A) A debt ratio of 0.60 or lower is considered a high-risk ratio.
B) A debt ratio above 1.00 is considered a good, safe ratio.
C) A debt ratio of 2.0 indicates very strong ability to pay liabilities.
D) A debt ratio of 0.60 or lower is a good, safe ratio.
23) Which of the following statements is an accurate interpretation of the current ratio?
A) A current ratio of 1.5 or higher is considered a high-risk ratio.
B) A current ratio below 1.00 is considered a good, safe ratio.
C) A current ratio of 2.0 indicates very strong ability to pay current liabilities.
D) A current ratio of 0.60 or lower is a good, safe ratio.
24) An adjusted trial balance for Southside Video Productions is presented below.
|
Debit
|
Credit
|
Cash
|
$ 11,500
|
|
Accounts receivable
|
9,000
|
|
Prepaid rent
|
5,000
|
|
Prepaid insurance
|
1,900
|
|
Supplies
|
3,200
|
|
Land
|
30,000
|
|
Building
|
52,200
|
|
Accumulated depreciation-building
|
|
$ 11,000
|
Equipment
|
35,000
|
|
Accumulated depreciation-equipment
|
|
7,000
|
Accounts payable
|
|
6,150
|
Salary payable
|
|
3,000
|
Interest payable
|
|
2,240
|
Mortgage payable (long term)
|
|
51,200
|
Common stock
|
|
10,000
|
Retained earnings (deficit)
|
15,590
|
|
Dividends
|
20,000
|
|
Service revenue
|
|
190,000
|
Salary expense
|
38,000
|
|
Insurance expense
|
5,000
|
|
Rent expense
|
12,000
|
|
Utilities expense
|
15,000
|
|
Advertising expense
|
9,000
|
|
Depreciation expense-building
|
10,000
|
|
Depreciation expense-equipment
|
7,000
|
|
Supplies expense
|
1,200
|
|
Total
|
$280,590
|
$280,590
|
Compute the current ratio.
A) 2.24
B) 1.87
C) 0.49
D) 2.69
25) An adjusted trial balance for Southside Video Productions is presented below:
|
Debit
|
Credit
|
Cash
|
$ 11,500
|
|
Accounts receivable
|
9,000
|
|
Prepaid rent
|
5,000
|
|
Prepaid insurance
|
1,900
|
|
Supplies
|
3,200
|
|
Land
|
30,000
|
|
Building
|
52,200
|
|
Accumulated depreciation-building
|
|
$ 11,000
|
Equipment
|
35,000
|
|
Accumulated depreciation-equipment
|
|
7,000
|
Accounts payable
|
|
6,150
|
Salary payable
|
|
3,000
|
Interest payable
|
|
2,240
|
Mortgage payable (long term)
|
|
51,200
|
Common stock
|
|
10,000
|
Retained earnings (deficit)
|
15,590
|
|
Dividends
|
20,000
|
|
Service revenue
|
|
190,000
|
Salary expense
|
38,000
|
|
Insurance expense
|
5,000
|
|
Rent expense
|
12,000
|
|
Utilities expense
|
15,000
|
|
Advertising expense
|
9,000
|
|
Depreciation expense-building
|
10,000
|
|
Depreciation expense-equipment
|
7,000
|
|
Supplies expense
|
1,200
|
|
Total
|
$280,590
|
$280,590
|
Compute the debt ratio.
A) 0.48
B) 0.52
C) 0.37
D) 2.07