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 Nord

Company’s current ratio?

a. The ratio remained unchanged.

b. The change in the current ratio cannot be

determined.

c. The ratio decreased.

d. The ratio increased.

98. If equal amounts are added to the numerator

and the denominator of the current ratio, the ratio will always

a. increase.

b. decrease.

c. stay the same.

d. equal zero.

99. The acid-test ratio

a. is a quick calculation of an approximation of

the current ratio.

b. does not include all current liabilities in

the calculation.

c. does not include inventory as part of the

numerator.

d. does include prepaid expenses as part of the

numerator.

100. If a company has an acid-test ratio of

1.2:1, what respective effects will the borrowing of cash by short-term debt

and collection of accounts receivable have on the ratio?

__Short-term Borrowing__ __Collection of Receivable__

a. Increase No effect

b. Increase Increase

c. Decrease No effect

d. Decrease Decrease

101. A company has a accounts receivable

turnover of 10 times. The average accounts receivable during the period are $400,000.

What is the amount of net credit sales for the period?

a. $40,000

b. $4,000,000

c. $400,000

d. Cannot be determined from the information

given

102. If the average collection period is 60

days, what is the accounts receivable turnover?

a. 6.0 times

b. 6.1 times

c. 12.2 times

d. None of these

103. A general rule to use in assessing the

average collection period is that

a. it should not exceed 30 days.

b. it can be any length as long as the customer

continues to buy merchandise.

c. it should not greatly exceed the discount

period.

d. it should not greatly exceed the credit term

period.

104. Inventory turnover is

calculated by dividing

a. cost of goods sold by the ending inventory.

b. cost of goods sold by the beginning

inventory.

c. cost of goods sold by the average inventory.

d. average inventory by cost of goods sold.

105. A company has an

average inventory on hand of $60,000 and the days in inventory is 73 days. What

is the cost of goods sold?

a. $300,000

b. $4,380,000

c. $600,000

d. $2,190,000

106. A successful grocery store would probably

have

a. a low inventory turnover.

b. a high inventory turnover.

c. zero profit margin.

d. low volume.