GOALS ACHIEVEMENT

Select the appropriate response.

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

short-term investments   or   merchandise inventory

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

liquidity ratio   or   profitability ratio

Inventory turnover and accounts receivable turnover are examples of:

coverage ratios   or   activity ratios

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

average inventory   or   cost of goods sold

The numerator for the return on assets ratio includes:

net income and preferred dividends   or   interest expense

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

debt   or   interest charges

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

true   or   false

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

true   or   false

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

true   or   false

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

operating activities   or   financing activities

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

sale of stocks of other firms   or   issuance of stock

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

true   or   false

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

exchanging land for stock   or   issuing a stock dividend

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

the indirect method   or   investing method

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

direct method   or   indirect method

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

decreases in accounts receivable   or   increases in accounts receivable

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

added   or   subtracted

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   or   false

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   or   false

Cash dividends paid are reported as a financing cash:

inflow   or   outflow

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

true   or   false