101. Which of the following statements is incorrect?
A. Higher financial leverage involves higher risk.
B. Risk is higher if a company has more liabilities.
Risk is higher if a company has higher assets.
D. The debt ratio is one measure of financial risk.
E. Lower financial leverage involves lower risk.
102. Stride Along has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio.
A. 38.6%.
B. 13.4%.
C. 34.9%.
25.9%.
E. 14.9%.
103. Stride Along has total assets of $385 million. Its total liabilities are $100 million and its equity is $285 million. Calculate its debt ratio.
A. 35.1%.
26.0%.
C. 38.5%.
D. 28.5%.
E. 58.8%.
104. Which of the following statements describing the debt ratio is false?
A. It is of use to both internal and external users of accounting information.
A relatively high ratio is always desirable.
C. The dividing line for a high and low ratio varies from industry to industry.
D. Many factors such as a company's age, stability, profitability and cash flow influence the determination of what would be interpreted as a high versus a low ratio.
E. The ratio might be used to help determine if a company is capable of increasing its income by obtaining further debt.
105. At the end of the current year, Norman Company reported total liabilities of $300,000 and total equity of $100,000. The company's debt ratio on the last year-end was:
A. 300%.
B. 33.3%
75.0%.
D. $400,000.
E. Cannot be determined from the information provided.
106. At the beginning of the current year, Taunton Company's total assets were $248,000 and its total liabilities were $175,000. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and owner withdrawals of $5,000. There were no other changes in owner's capital during the year and total assets at the end of the year were $260,000. Taunton Company's debt ratio at the end of the current year is:
A. 70.6%.
67.3%.
C. 32.7%.
D. 48.6%.
E. Cannot be determined from the information provided.
107. The process of transferring general journal information to the ledger is:
A. Double-entry accounting.
Posting.
C. Balancing an account.
D. Journalizing.
E. Not required unless debits do not equal credits.
108. A column in journals and ledger accounts used to cross reference journal and ledger entries is the:
A. Account balance column.
B. Debit column.
Posting reference column.
D. Credit column.
E. Description column.
109. The record in which transactions are first recorded is the:
A. Account balance.
B. Ledger.
Journal.
D. Trial balance.
E. Cash account.
110. The general journal provides a place for recording all of the following except:
A. The transaction date.
B. The names of the accounts involved.
C. The amount of each debit and credit.
D. An explanation of the transaction.
The balance in each account.
