Learning Objective 2-5
1) The current ratio measures the ________.
A) amount of revenue recognized in the current accounting period
B) liquidity of a company
C) profitability of a company
D) financial risk of a company
2) Liquidity ________.
A) represents the amount of financial risk a company assumes
B) measures how easily a company can turn its long-term assets into cash
C) measures how easily a company can pay its debts as they come due
D) is always higher for large companies than for small companies
3) Team Shirts had current assets of $2,500, long-term assets of $3,850, current liabilities of $1,450, long-term liabilities of $2,000, and shareholder's equity of $2,900. The current ratio (rounded) is ________.
A) 0.72
B) 1.84
C) 4.38
D) 1.72
4) Team Shirts had current assets of $500 and total assets of $2,300. Long-term liabilities were $700 and total liabilities were $1,430. The current ratio (rounded) is ________.
A) 0.68
B) 1.61
C) 0.35
D) 0.71
5) Maids-R-Us had current assets of $1,160 and total assets of $2,640. It had $650 in accounts payable and a note payable for $1,500 due in two years. The current ratio (rounded) was ________.
A) 1.23
B) 1.78
C) 0.54
D) 0.81
6) Clean Sweep had current assets of $650 and long-term assets of $1,350. It had current liabilities of $500 and a note payable of $600 due in three years. Its current ratio (rounded) was ________.
A) 1.30
B) 1.82
C) 4.00
D) 0.59
7) Before lending money to Brokah, Inc., you should calculate Brokah's current ratio to measure its ________.
A) liquidity,
i.e., its ability to pay its current debts as they come due
B) ability to turn its noncurrent liabilities into current liabilities
C) profitability
D) ability to turn its noncurrent assets into current assets
8) The current ratio measures a company's ability to pay its bills.
9) Team Shirts has $189,000 in total current assets and $165,000 in total current liabilities. Calculate the current ratio for Team Shirts. Round your answer to one decimal place.
10) Team Shirts has $240,000 in total current assets and $190,000 in total current liabilities. Calculate the current ratio for Team Shirts. Round your answer to one decimal place.