problem: A firm’s debt ratio is 60%. This means that
[A] The firm has legal claims against only 40% of the assets.
[B] The firm has legal claims against only 60% of the assets.
[C] 40% of the assets were provided by shareholders.
[D] 60% of the assets were provided by shareholders.
[E] 60% of every sales dollar must be paid to the creditors.
problem2: Possible asset categories on a balance sheet include all of the following except
[A] Retained earnings
[B] Current assets
[C] Property, plant, and equipment
[D] Intangible assets
[E] Long-term investments
problem3: Expense should be included in the income statement in the period in which (hint: the matching principle applies here)
[A] The related revenue is subject to tax
[B] The related revenue is earned
[C] It is paid
[D] The related revenue is collected
[E] It is deductible for tax purposes
problem4: Comparing one firm’s liquidity to another is best accomplished by comparing
[A] Debt-to-asset ratio.
[B] Debt-to-equity ratio.
[C] Working capital.
[D] Current ratio.
[E] Gross profit.