The relationship between current assets and current

Question

1. The relationship between current assets and current liabilities is important in evaluating a company's

• solvency.
• profitability.
• market value.
• liquidity.

2. Which of the following is a measure of liquidity?

• Debt to equity ratio
• Profit margin
• Earnings per share
• Working capital

3. Current assets divided by current liabilities is known as the

• capital structure.
• working capital
• current ratio.
• profit margin.

4. Danner Corporation reported net sales of $600,000, $680,000, and $800,000 in the years 2011, 2012, and 2013, respectively. If 2011 is the base year, what percentage do 2013 sales represent of the base?

• 133%
• 33%
• 113%
• 75%

5. In analyzing financial statements, horizontal analysis is a

• principle.
• tool.
• theory.
• requirement.

6. Comparative balance sheets

• do not show both dollar amount and percentage changes.
• are usually prepared for at least two years.
• are usually prepared for at least one year.
• do not show a comparison of total stockholders' equity.

7. Assume the following cost of goods sold data for a company:

2013$1,500,000

20121,200,000

20111,000,000

If 2011 is the base year, what is the percentage increase in cost of goods sold from 2011 to 2013?

• 50%
• 20%
• 67%
• 150%

8. Comparisons of data within a company are an example of the following comparative basis: 

• Intercompany.
• Intracompany.
• Interregional.
• Industry averages.

9. The following schedule is a display of what type of analysis?

Amount  Percent

Current assets$100,000  25%    

Property, plant, and equipment300,000  75%    

Total assets$400,000  100%    

• Horizontal analysis
• Differential analysis
• Vertical analysis
• Ratio analysis

10. A common measure of profitability is the

• current cash debt coverage ratio.
• debt to total assets.
• return on common stockholders' equity ratio.
• current ratio.

11. Which one of the following would be considered a long-term solvency ratio? 

• Return on total assets
• Current cash debt coverage ratio
• Receivables turnover
• Debt to total assets ratio

12. The current ratio is

• calculated by dividing current liabilities by current assets.
• used to evaluate a company's liquidity and short-term debt paying ability.
• used to evaluate a company's solvency and long-term debt paying ability.
• calculated by subtracting current liabilities from current assets.

13. Richards, Inc. has the following income statement (in millions):

RICHARDS, INC.

Income Statement

For the Year Ended December 31, 2012

Net Sales$180

Cost of Goods Sold60

Gross Profit120

Operating Expenses75

Net Income$ 45

Using vertical analysis, what percentage is assigned to net income?

• A.100%
• B.75%
• C.25%
• D.None of the above.