Ratios

A percentage is a type of ratio.

• True

• False

Current liabilities divided by current assests gives the current ratio.

• True

• False

The quick ratio is the same as the current ratio except that, in the quick ratio, the accounts receivable are not included in the current assets.

• True

• False

The accounts receivable average collection period is calculated by dividing 365 by the annual accounts receivable turnover ratio.

• True

• False

            Creditors of a company prefer to see a high, rather than a low, debt to equity ratio.

• True

• False

A company may have a net income without being profitable.

• True

• False

A current ratio of 2 to 1 means that:

• Current liabilities are twice as high as current assets

• The difference between current assets and current liabilities is the same amount as current liabilities

• The odds are two to one that the company will not be able to pay off its short‑term debts

• The company will take twice as long as normal to pay what it owes

The three major users of ratios are:

• Nicole, Justin Bieber, Celine Dion

• Lenders, creditors, and investors

• Management, creditors, and owners

• Management, creditors, department heads

A company has cash $1,400, accounts receivable $2,100, marketable securities $4,000, inventory $1,200, accounts payable $4,700, accrued expenses $500, and common stock $1,000. Its quick ratio is:

• 1.39:1

• 1.67:1

• 1.60:1

• 1.44:1