Lesson 10
Understanding and Using Financial Statements
Self-Test
1,What type of analysis is indicated by the following?
Amount Percent
Current assets 200 40%
Plant assets 300 60%
Total assets 500 100%
A,Vertical analysis B,Ratio analysis
C,Horizontal analysis D,None of the above
2,Which of the following measures is useful as an indication of the ability of a firm to liquidate current liabilities?
A,Current ratio B,quick ratio
C,working capital ratio D,All of the above
3,The ratio determined by dividing total current assets by total current liabilities is
A,Current ratio B,acid-test ratio
C,Interest earned times D,none of the above
4,The ratio of the quick assets to current liabilities,which indicates the,instant” debt-paying ability of a firm,is
A,Current ratio B,acid-test ratio
C,Interest earned times D,none of the above
5,A measure useful in evaluating the efficiency in the management of inventories is:
A,Inventory turnover B,Number of days’ sales in inventory
C,Both A and B D,none of the above
6,To apply a vertical analysis to the balance sheet,the base amount usually selected is,
A,total assets, B,total liabilities,
C,total shareholders' equity, D,total revenues,
7,Which of the following ratios is an indicator of liquidity?
A,Total current asset to total current assets B,Inventory turnover
C,Age of receivables D,Creditor's equity in total assets
8,ABC has provided the following information in 000's on selected cash
transactions for 20x5:
Purchase of operating assets $6,400
Purchase of inventories 16,000
Proceeds from short-term borrowing 2,400
Proceeds from long-term borrowing 8,000
Proceeds from sale of RST's common shares 4,000
What is the increase in working capital for the year ended December 31,20x2,as a result of the above information?
A,$400 B,$4,000 C,$5,600 D,None of the above
Understanding and Using Financial Statements
Self-Test
1,What type of analysis is indicated by the following?
Amount Percent
Current assets 200 40%
Plant assets 300 60%
Total assets 500 100%
A,Vertical analysis B,Ratio analysis
C,Horizontal analysis D,None of the above
2,Which of the following measures is useful as an indication of the ability of a firm to liquidate current liabilities?
A,Current ratio B,quick ratio
C,working capital ratio D,All of the above
3,The ratio determined by dividing total current assets by total current liabilities is
A,Current ratio B,acid-test ratio
C,Interest earned times D,none of the above
4,The ratio of the quick assets to current liabilities,which indicates the,instant” debt-paying ability of a firm,is
A,Current ratio B,acid-test ratio
C,Interest earned times D,none of the above
5,A measure useful in evaluating the efficiency in the management of inventories is:
A,Inventory turnover B,Number of days’ sales in inventory
C,Both A and B D,none of the above
6,To apply a vertical analysis to the balance sheet,the base amount usually selected is,
A,total assets, B,total liabilities,
C,total shareholders' equity, D,total revenues,
7,Which of the following ratios is an indicator of liquidity?
A,Total current asset to total current assets B,Inventory turnover
C,Age of receivables D,Creditor's equity in total assets
8,ABC has provided the following information in 000's on selected cash
transactions for 20x5:
Purchase of operating assets $6,400
Purchase of inventories 16,000
Proceeds from short-term borrowing 2,400
Proceeds from long-term borrowing 8,000
Proceeds from sale of RST's common shares 4,000
What is the increase in working capital for the year ended December 31,20x2,as a result of the above information?
A,$400 B,$4,000 C,$5,600 D,None of the above
