97.              West Company had $375,000 of current assets and $150,000

Question : 97.              West Company had $375,000 of current assets and $150,000 : 1311998



97.              West Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $75,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on West Company's current ratio?

a.The ratio remained unchanged.

b.The change in the current ratio cannot be determined.

c.The ratio decreased.

d.The ratio increased.



98.              If equal amounts are added to the numerator and the denominator of the current ratio, the ratio will always



c.stay the same.

d.equal zero.



99.              The acid-test ratio

a.is a quick calculation of an approximation of the current ratio.

b.does not include all current liabilities in the calculation.

c.does not include inventory as part of the numerator.

d.does include prepaid expenses as part of the numerator.



100.If a company has an acid-test ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio?

Short-term BorrowingCollection of Receivable

a.IncreaseNo effect


c.DecreaseNo effect




101.A company has a receivables turnover of 10 times. The average receivables during the period are $500,000. What is the amount of net credit sales for the period?




d.Cannot be determined from the information given



102.If the average collection period is 60 days, what is the receivables turnover?

a.6.0 times

b.6.1 times

c.12.2 times

d.None of these



103.A general rule to use in assessing the average collection period is that

a.it should not exceed 30 days.

b.it can be any length as long as the customer continues to buy merchandise.

c.it should not greatly exceed the discount period.

d.it should not greatly exceed the credit term period.



104.Inventory turnover is calculated by dividing

a.cost of goods sold by the ending inventory.

b.cost of goods sold by the beginning inventory.

c.cost of goods sold by the average inventory.

d.average inventory by cost of goods sold.



105.A company has an average inventory on hand of $40,000 and the days in inventory is 73 days. What is the cost of goods sold?







106.A successful grocery store would probably have

a.a low inventory turnover.

b.a high inventory turnover.

c.zero profit margin.

d.low volume.




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