Question : 76.Beginning inventory plus net purchases is: A.Cost of goods sold. B.Merchandise (goods) : 1258794

 

 

76.Beginning inventory plus net purchases is:   

A.Cost of goods sold.

 

B.Merchandise (goods) available for sale.

 

C.Ending inventory.

 

D.Sales.

 

E.Shown on the balance sheet.

 

 

 

 

77.The acid-test ratio:   

A.Is also called the quick ratio.

 

B.Measures profitability.

 

C.Measures inventory turnover.

 

D.Is generally greater than the current ratio.

 

E.Measures return on assets.

 

 

 

 

78.Quick assets are defined as:   

A.Cash, short-term investments, and inventory.

 

B.Cash, short-term investments, and current receivables.

 

C.Cash, inventory, and current receivables.

 

D.Cash, noncurrent receivables, and prepaid expenses.

 

E.Accounts receivable, inventory, and prepaid expenses.

 

 

 

 

79.KLM Corporation’s quick assets are $5,888,000, its current assets are $11,700,000 and its current liabilities are $8,000,000. Its acid-test ratio equals:   

A.0.50.

 

B.0.68.

 

C.0.74.

 

D.1.50.

 

E.2.20.

Acid-Test Ratio = Quick Assets/Current LiabilitiesAcid-Test Ratio = $5,888,000/$8,000,000 = 0.74

 

 

 

80.A company’s current assets are $17,980, its quick assets are $11,420 and its current liabilities are $12,190. Its quick ratio equals:   

A.0.94.

 

B.1.07.

 

C.1.48.

 

D.1.57.

 

E.2.40.

Acid-Test Ratio = Quick Assets/Current LiabilitiesAcid-Test Ratio = $11,420/$12,190 = 0.94

 

 

 

81.Liquidity problems are likely to exist when a company’s acid-test ratio:   

A.Is less than the current ratio.

 

B.equals 1.

 

C.Is higher than 1.

 

D.Is substantially lower than 1.

 

E.Is higher than the current ratio.

 

 

 

 

82.The acid-test ratio differs from the current ratio in that:   

A.Liabilities are divided by current assets.

 

B.Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio.

 

C.The acid-test ratio measures profitability and the current ratio does not.

 

D.The acid-test ratio excludes short-term investments from the calculation.

 

E.The acid-test ratio is a measure of liquidity but the current ratio is not.

 

 

 

 

83.Using the following year-end information for Calvin’s Clothing, Inc., calculate the current ratio and acid-test ratio for the business: 

Cash$52,000

Short-term investments12,000

Accounts receivable54,000

Inventory325,000

Prepaid expenses17,500

Accounts payable106,500

Other current payables25,000

  

A.1.80 and 1

 

B.1.97 and 1.52

 

C.2.73 and 1.52

 

D.3.50 and 0.90

 

E.1.80 and 0.90

Current Ratio = Current Assets/Current LiabilitiesCurrent Ratio = $460,500/$131,500 = 3.50Acid-Test Ratio = Quick Assets/Current LiabilitiesAcid-Test Ratio = $118,000/$131,500 = 0.90

 

 

 

84.The gross margin ratio:    

A.Is also called the net profit ratio.

 

B.Indicates the percent of sales revenue remaining after covering the cost of the goods sold.

 

C.Is also called the profit margin.

 

D.Is a measure of liquidity and should exceed 2.0 to be acceptable.

 

E.Should be greater than 1 for merchandising companies.

 

 

 

 

85.A company’s gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals:   

A.4.2%.

 

B.24.1%.

 

C.75.9%.

 

D.$83,750.

 

E.$264,050.

Gross Margin Ratio = Gross Profit/Net SalesGross Margin Ratio = $83,750/$347,800 = 24.1%