87. Trading on the equity (leverage) refers to

the

a. amount of working capital.

b. amount of capital provided by owners.

c. use of borrowed money to increase the return

to owners.

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

a. 250%.

b. 2.5 : 1

c. .25 : 1

d. $250,000 ÷ $100,000.

89. The current ratio may also be referred to

as the

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

analysts.

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

analysis

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

quite meaningful.

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

a. profit

margin.

b. return

on assets.

c. return

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