87. Trading on the equity (leverage) refers to
a. amount of working capital.
b. amount of capital provided by owners.
c. use of borrowed money to increase the return
d. number of times interest is earned.
88. The current assets of Myers Company are
$250,000. The current liabilities are $100,000. The current ratio expressed as
a proportion is
b. 2.5 : 1
c. .25 : 1
d. $250,000 ÷ $100,000.
89. The current ratio may also be referred to
a. short run ratio.
b. acid-test ratio.
c. working capital ratio.
d. contemporary ratio.
90. A weakness of the current ratio is
a. the difficulty of the calculation.
b. that it doesn’t take into account the
composition of the current assets.
c. that it is rarely used by sophisticated
d. that it can be expressed as a percentage, as
a rate, or as a proportion.
91. A supplier to a company would be most
interested in the company’s
a. asset turnover.
b. profit margin.
c. current ratio.
d. earnings per share.
92. Which one of the following ratios would not
likely be used by a short-term creditor in evaluating whether to sell on credit
to a company?
a. Current ratio
b. Acid-test ratio
c. Asset turnover
d. Accounts receivable
93. Ratios are used as tools in financial
a. instead of horizontal and vertical analyses.
b. because they may provide information that is
not apparent from inspection of the individual components of the ratio.
c. because even single ratios by themselves are
d. because they are prescribed by GAAP.
94. The ratios that are used to determine a
company’s short-term debt paying ability are
a. asset turnover, times interest earned,
current ratio, and accounts receivable turnover.
b. times interest earned,
inventory turnover, current ratio, and accounts receivable turnover.
c. times interest earned, acid-test ratio,
current ratio, and inventory turnover.
d. current ratio, acid-test ratio, accounts
receivable turnover, and inventory turnover.
95. A measure of the percentage
of each dollar of sales that results in net income is
on common stockholders’ equity.
d. earnings per share.
96. Nord Company had $375,000 of current assets
and $150,000 of current liabilities before borrowing $70,000 from the bank with
a 3-month note payable. What effect did the borrowing transaction have on the
amount of Nord Company’s working capital?
a. No effect
b. $70,000 increase
c. $140,000 increase
d. $70,000 decrease