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Working capital is Current assets divided by current liabilities

Working capital is

a.   Current assets divided by current liabilities.

b.   Current assets minus current liabilities.

c.   Cash, short-term investments, and accounts receivable divided by current liabilities.

d.   Cash, short-term investments, and accounts receivable minus current liabilities.

 

 

112. The current ratio is

a.   Current assets divided by current liabilities.

b.   Cash and short-term investments divided by current liabilities.

c.   Cash, short-term investments, and accounts receivable divided by current liabilities.

d.   Cash, short-term investments, accounts receivable, and inventory divided by current liabilities.

 

 

113. The acid-test ratio is

a.   Current assets divided by current liabilities.

b.   Cash and short-term investments divided by current liabilities.

c.   Cash, short-term investments, and accounts receivable divided by current liabilities.

d.   Cash, short-term investments, accounts receivable, and inventory divided by current liabilities.

 

 

114. Which of the following measures of liquidity does not control for the relative size of the company? 

a.   Working capital.

b.   Current ratio.

c.   Acid-test ratio.

d.   They all control for the relative size of the company.

 

 

115. Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, 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. Decrease the current ratio and increase the acid-test ratio.

 

 

116. Assuming a current ratio of 1.0 and an acid-test ratio of 0.80, how will the borrowing of cash by issuing a six-month note payable affect each ratio? 

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

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

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

d. Decrease the current ratio and increase the acid-test ratio.

Jan 27 2020 View more View Less

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