Question : Multiple Choice Questions 31. Which of the following best describes liquidity? A. The ability : 1229558

Multiple Choice Questions
 

31. Which of the following best describes liquidity? 
A. The ability to increase the value of retained earnings.
B. The ability to pay the debts of the company as they become due.
C. Being able to buy everything the company requires for cash.
D. Purchasing everything the company requires on credit.

32. Profitability may be defined as: 
A. The ability to pay the debts of the company as they fall due.
B. The ability to increase retained earnings.
C. Distributing dividends.
D. Having excess cash.

33. The principle of adequate disclosure means that a company should disclose: 
A. Only the important monetary information.
B. All confidential information regarding the company.
C. Any financial facts that a reasonably informed person would consider necessary for the proper interpretation of the financial statements.
D. Only subsequent events.

34. Blue Wholesale Shirt Co. sold shirts to Pink Retail Shoppe. The owner of Pink Retail said she would pay Blue at a later date, which Blue Wholesale agreed to. Blue Wholesale Shirt Co. is considered to be a: 
A. borrower.
B. liability.
C. creditor.
D. debtor.

35. Owners’ equity in a business increases as a result of which of the following? 
A. Payments of cash to the owners.
B. Losses from unprofitable operation of the business.
C. Earnings from profitable operation of the business.
D. Borrowing from a commercial bank.

36. Owners’ equity in a business decreases as a result of which of the following? 
A. Investments of cash by the owners.
B. Profits from operating the business.
C. Losses from unprofitable operation of the business.
D. Repaying a loan to a commercial bank.

37. Which one of the following is not considered one of the three primary financial statements? 
A. Balance sheet.
B. Income statement.
C. Statement of cash flows.
D. Statement of budgeting activities.

38. Which of the following is the primary objective of financial statements? 
A. Providing managers with detailed information tailored to the managers’ specific information needs.
B. Providing users outside the business organization with information about the company’s financial position and operating results.
C. Reporting to the Internal Revenue Service the company’s taxable income.
D. Indicating to investors in a particular company the current market values of their investments.

39. Which of the following is descriptive of the proper form of a balance sheet? 
A. The heading sets forth the period of time covered.
B. Cash is always the first asset listed, followed by permanent assets (such as land and buildings), and finally by assets such as receivables and supplies.
C. Liabilities are listed before owners’ equity.
D. A subtotal for total assets plus total liabilities is shown.

40. A balance sheet is designed to show: 
A. How much a business is worth.
B. The profitability of the business during the current year.
C. The assets, liabilities, and owners’ equity of a business as of a particular date.
D. The cost of replacing the assets and of paying off the liabilities at December 31.