Financial Statements Analysis, Financial Ratios, and Cash Flows mock final part #1

Question 1

Which of the following items is NOT included in current assets?
a. Accounts receivable.
b. Inventory.
c. Bonds.
d. Cash.
e. Short-term, highly liquid, marketable securities.

Answer 1

c. Bonds.

Question 2

Lindley Corp.’s stock price at the end of last year was $33.50, and its book value per share
was $25.00. What was its market/book ratio?
a. 1.34
b. 1.41
c. 1.48
d. 1.55
e. 1.63

Answer 2

a. 1.34

Question 3

Which of the following items cannot be found on a firm’s balance sheet under current
liabilities?
a. Accounts payable.
b. Short-term notes payable to the bank.
c. Accrued wages.
d. Cost of goods sold.
e. Accrued payroll taxes.

Answer 3

d. Cost of goods sold

Question 4

Considered alone, which of the following would increase a company’s current ratio?
a. An increase in net fixed assets.
b. An increase in accrued liabilities.
c. An increase in notes payable.
d. An increase in accounts receivable.
e. An increase in accounts payable.

Answer 4

d. An increase in accounts receivable.

Question 5

Other things held constant, which of the following alternatives would increase a company’s
cash flow for the current year?

a. Increase the number of years over which fixed assets are depreciated for tax
purposes.
b. Pay down the accounts payables.
c. Reduce the days’ sales outstanding (DSO) without affecting sales or operating
costs.
d. Pay workers more frequently to decrease the accrued wages balance.
e. Reduce the inventory turnover ratio without affecting sales or operating costs.

Answer 5

c. Reduce the days’ sales outstanding (DSO) without affecting sales or operating