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The acid-test ratio is most similar to the Current ratio

The acid-test ratio is most similar to the:

a.Current ratio.

b.Debt to equity ratio.

c.Times interest earned ratio.

d.Inventory turnover ratio.

 

 

68. The acid-test ratio is:

a.The liquidity ratio divided by the equity ratio.

b.Current assets minus inventory divided by current liabilities minus accounts payable.

c.Cash, net receivables, and current investments divided by current liabilities.

d.Cash divided by accounts payable.

 

 

69. Which of the following is not a solvency ratio?

a.Time interest earned ratio.

b.The debt to equity ratio.

c.The current ratio.

d.All of the other options are solvency ratios.

 

 

70. When a company with a current ratio of 1.2 pays a current liability:

a.Its current ratio decreases.

b.Its current ratio increases.

c.Its current ratio remains unchanged.

d.Its debt to equity ratio increases.

 

 

71. Assuming a current ratio of 1.0, how will the purchase of inventory with cash affect the ratio?

a. Increase the current ratio.

b. No change to the current ratio.

c. Decrease the current ratio.

d. Could either increase or decrease the current ratio.

 

 

72. Assuming an acid-test ratio of 1.0, how will the purchase of inventory with cash affect the ratio?

a. Increase the acid-test ratio.

b. No change to the acid-test ratio.

c. Decrease the acid-test ratio.

d. Could either increase or decrease the acid-test ratio.

 

 

73. Assuming a current ratio of 1.0 and an acid-test ratio of 0.75, how will the purchase of inventory with cash affect each ratio?

a. Increase the current ratio and increase the acid-test ratio.

b. No change to the current ratio and decrease the acid-test ratio.

c. Decrease the current ratio and decrease the acid-test ratio.

d. Increase the current ratio and decrease the acid-test ratio.

 

 

              74. When a company sells land for cash and makes a $25,000 gain:

a.Its acid-test ratio decreases.

b.Its current ratio decreases.

c.Its debt to equity ratio decreases.

d.Cannot determine from the given information.

 

 

75. Assume a company's current ratio and acid-test ratio are less than 1.0 before it purchases inventory on credit.  When it makes the purchase:

a.Its current ratio decreases.

b.Its acid-test ratio decreases.

c.Its current ratio remains unchanged.

d.Its acid-test ratio remains unchanged.

 

Use the following information to answer the next three questions:

A partial balance sheet ($s in thousands) for Captain D’s Sportswear is shown below.

 

Assets:

 

 

  Liabilities:

 

  Cash

$ 60

 

  Accounts payable

$240

  Accounts receivable (net)

170

 

  Other liabilities

   80

  Investments

50

 

  Total current liabilities

320

  Inventory

200

 

  Long-term liabilities

110

  Prepaid rent

  25

 

       Total liabilities

430

      Total current assets

505

 

  Stockholders’ equity:

 

  Property & Equipment, (net)

255

 

  Common stock

150

 

 

 

  Retained earnings

180

 

 

 

  Total stockholders’ equity

330

Total assets

$760

 

  Total liabilities and equity

$760

 

 

 

 

 

 

 

 

76. The current ratio is:

a.1.98.

b.1.58.

c.1.17.

d.0.66.

Jan 27 2020 View more View Less

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