21) If management wishes to know the ability to pay off the upcoming debts of a business, they could use the:

A) debt to total assets.

B) current ratio

C) inventory turnover ratio.

D) times interest earned.

 

22) If management wishes to evaluate how effectively the assets of a business are being used, they could use the:

A) asset turnover.

B) rate of return on common stockholders’ equity.

C) acid test ratio.

D) debt to total stockholders’ equity.

 

23) If management wishes to evaluate the ability of a business to provide funding to cover the operating expenses, they could use the:

A) rate of return on total assets.

B) rate of return on common stockholders’ equity.

C) gross profit rate.

D) times interest earned.

24) If management wishes to measure how effectively the assets were used in generating a profit, they could use the:

A) rate of return on total assets.

B) rate of return on common stockholders’ equity.

C) return on sales.

D) times interest earned.

 

25) If management wishes to know how long it takes to collect from a charge customer, they could use the:

A) rate of return on total assets.

B) average collection period.

C) acid test ratio.

D) current ratio.

 

26) If management wishes to evaluate the amount of assets which were financed by creditors, they could use the:

A) debt to total assets.

B) rate of return on common stockholders’ equity.

C) debt to total liabilities.

D) times interest earned.

 

27) If management wishes to know how well the inventory is moving for a business, they could use the:

A) accounts receivable turnover.

B) inventory turnover.

C) acid test ratio.

D) current ratio.

28) If management wishes to measure a business’s ability to pay upcoming debts, they could refer to measures for:

A) leverage.

B) liquidity.

C) debt management.

D) profitability.

 

29) Scott Company had a current ratio of 2.76:1 in Year 1 and 2.57:1 in Year 2. This change in current ratio indicates:

A) the company’s debt paying ability has improved.

B) the company’s debt paying ability has weakened.

C) the company’s customers are paying their accounts sooner.

D) the company is able to sell its inventory faster.

 

30) Noble Company’s accounts receivable turnover was 18.2 in Year 1 and 24.6 in Year 2. This change in accounts receivable turnover indicates:

A) the company is not selling its inventory as fast.

B) the company is selling its inventory faster.

C) the company’s customers are paying faster.

D) the company’s customers are paying slower.

 

 

 



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