Which of the following is excluded in calculating the quick ratio?

short-term investments   Incorrect or    merchandise inventoryCorrect

 

Which type of ratio is useful for measuring the ability of a business to meet current debts as they come due?

liquidity ratio   Correct or    profitability ratioIncorrect

 

Inventory turnover and accounts receivable turnover are examples of:

coverage ratios   Incorrect or    activity ratiosCorrect

 

What is included in the numerator of the inventory turnover ratio?

average inventory   Incorrect or    cost of goods soldCorrect

 

The numerator for the return on assets ratio includes:

net income and preferred dividends   Correct or    interest expenseIncorrect

 

The times interest earned ratio consists of income before income taxes and interest divided by:

debt    Incorrect or    interest chargesCorrect

 

The statement of cash flows reveals the cash generated or consumed by a firm's operating, investing, and financing activities.

true   Correct or    falseIncorrect

 

Cash flow information provides signals about the maturity of a business, as well as information about looming financial problems.

true   Correct or    falseIncorrect

 

The statement of cash flows is primarily designed to explain the changes in retained earnings.

true   Incorrect or    falseCorrect

 

Which activities relate primarily to the production and sale of goods and services and enter into the determination of income?

operating activities   Correct or    financing activitiesIncorrect

 

Which of the following would constitute a typical cash inflow from an investing activity?

sale of stocks of other firms   Correct or    issuance of stockIncorrect

 

Only transactions that directly generate or consume cash are reported on a statement of cash flows.

true   Incorrect or   falseCorrect

 

Which of the following would constitute a noncash investing/financing transaction?

exchanging land for stock   Correct or   issuing a stock dividendIncorrect

 

Significant noncash investing/financing transactions are reported on a statement of cash flows prepared using either the direct method or:

the indirect method   Correct or    investing methodIncorrect

 

Which of the following approaches to preparing the statement of cash flows translates income from the accrual basis to the cash basis?

direct method    Incorrect or    indirect methodCorrect

 

Cash received from customers can be calculated by starting with accrual basis sales and adding:

decreases in accounts receivable    Correct or   increases in accounts receivableIncorrect

 

To calculate cash flow from operating activities under the indirect method, nonoperating gains should be:

added    Incorrect or    subtractedCorrect

 

With the indirect approach to calculating cash flow from operating activities, increases in current assets related to operations should be subtracted from the accrual basis income figure.

true   Correct or   falseIncorrect

 

In preparing a statement of cash flows, the proceeds from a disposal of equipment should be reported as a cash inflow from investing activities.

true   Correct or    falseIncorrect

 

Cash dividends paid are reported as a financing cash:

inflow   Incorrect or    outflowCorrect

 

Both the direct and indirect methods are acceptable for external financial reporting.

true   Correct or    falseIncorrect