1The debt ratio measures a company's overall ability to pay stockholders.
2The current ratio and the debt ratio are shown on the income statement.
3Which of the following measures a company's ability to pay current liabilities with current assets.
A) Net income
B) Debt ratio
C) Current ratio
D) Total assets
4The following is the balance sheet for Green Landscaping, Inc.:
Greene Landscaping, Inc.
Balance Sheet
December 31, 2012
AssetsLiabilities
Cash$15,000Accounts payable$ 22,000
Accounts receivable30,000Salaries payable12,000
Supplies4,000Unearned service
revenue
25,000
Prepaid insurance8,000Total liabilities59,000
Equipment$85,000
Less: Accumulated
depreciation
10,000
75,000Stockholders’ Equity
Common stock50,000
Retained earnings23,000
Total assets
$132,000Total liabilities and
stockholders’ equity
$132,000
Which of the following is the current ratio? (Round to 2 decimal places.)
A) .97
B) .68
C) .25
D) 1.27
5The following is the Balance Sheet for Green Landscaping, Inc.:
Greene Landscaping, Inc.
Balance Sheet
December 31, 2012
AssetsLiabilities
Cash$15,000Accounts payable$ 22,000
Accounts receivable30,000Salaries payable12,000
Supplies4,000Unearned service
revenue
25,000
Prepaid insurance8,000Total liabilities59,000
Equipment$85,000
Less: Accumulated
depreciation
10,000
75,000Stockholders’ Equity
Common stock50,000
Retained earnings23,000
Total assets
$132,000Total liabilities and
stockholders’ equity
$132,000
Which of the following is the debt ratio? (Round to 2 decimal places.)
A) .39
B) .45
C) 1.04
D) .79
6Please refer to the following balance sheet:
AssetsLiabilities
Current assets:Current liabilities:
Cash$1,700Accounts payable$1,200
Accounts receivable10,500Salary payable980
Supplies20Unearned revenue600
Total current assets$12,220Total current liabilities2,780
Plant assets:Long-term liabilities:
Equipment12,500Notes payable5,000
Less: Accumulated
depreciation
2,240
10, 260
Total liabilities
7,780
Stockholders’ Equity
Common stock1,000
Retained earnings13,700
Total stockholders’ equity14,700
Total assets
$22,480Total liabilities and
stockholders’ equity
$22,480
How much is the current ratio? (Round to 2 decimal places.)
A) 0.35
B) 2.89
C) 0.23
D) 4.40
7Please refer to the following balance sheet:
AssetsLiabilities
Current assets:Current liabilities:
Cash$1,700Accounts payable$1,200
Accounts receivable10,500Salary payable980
Supplies20Unearned revenue600
Total current assets$12,220Total current liabilities2,780
Plant assets:Long-term liabilities:
Equipment12,500Notes payable5,000
Less: Accumulated
depreciation
2,240
10, 260
Total liabilities
7,780
Stockholders’ Equity
Common stock1,000
Retained earnings13,700
Total stockholders’ equity14,700
Total assets
$22,480Total liabilities and
stockholders’ equity
$22,480
How much is the debt ratio? (Round to 2 decimal places.)
A) 0.35
B) 2.89
C) 0.23
D) 4.40
8Which of the following would be considered the POOREST current ratio?
A) 0.5
B) 1.1
C) 1.3
D) 1.8
9Which debt ratio would indicate the BEST overall ability of an organization to pay its debts?
A) 25%
B) 40%
C) 60%
D) 130 %
10The formula for computing a current ratio is:
A) Current assets/Total assets.
B) Current assets/Total liabilities.
C) Current assets/Total equity.
D) Current assets/Current liabilities.