FA Chapter 10

Question 1

Debt is considered

Answer 1

riskier than equity

Question 2

While a high quick ratio normally suggests good liquidity, too high a ratio suggests

Answer 2

inefficient use of resources

Question 3

Wages Expense is the same as

Answer 3

• Compensation Expense

- Gross Pay

Question 4

Contingent liabilities

Answer 4

potential liabilities that are created as a result of a past event. A future event may confirm that the liability exists.

Question 5

Three probabilities of occurrence

Answer 5

1. Probable—the chance that the future event or events will occur is high.
2. Reasonably possible—the chance that the future event or events will occur is more than remote but less than likely.
3. Remote—the chance that the future event or events will occur is slight.