Chapter 3 Test Bank

Chapter 3 Test Bank - CHAPTER 3 Working with Financial...

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CHAPTER 3 Working with Financial Statements I. DEFINITIONS Topic: SOURCES OF CASH 1. Activities of the firm that generate cash are known as: A) Sources of cash. B) Uses of cash. C) Cash payments. D) Cash receipts. E) Cash on hand. Answer: A Topic: USES OF CASH 2. Activities of the firm in which cash is spent are known as: A) Sources of cash. B) Uses of cash. C) Cash payments. D) Cash receipts. E) Cash on hand. Answer: B Topic: STATEMENT OF CASH FLOWS 3. The financial statement that summarizes the sources and uses of cash over a specified period is: A) The income statement. B) The balance sheet. C) The tax reconciliation statement. D) The statement of cash flows. E) The statement of operating position. Answer: D Topic: COMMON-SIZE STATEMENTS 4. A __________ standardizes items on the income statement and balance sheet as a percentage of total sales and total assets, respectively. A) tax reconciliation statement B) statement of standardization C) statement of cash flows D) common-base year statement E) common-size statement Answer: E
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Topic: COMMON-BASE YEAR STATEMENTS 5. A __________ standardizes items on the income statement and balance sheet relative to a point in time. A) statement of standardization B) statement of cash flows C) common-base year statement D) common-size statement E) tax reconciliation statement Answer: C Topic: FINANCIAL RATIOS 6. Relationships determined from a firm's financial information and used for comparison purposes are known as: A) Financial ratios. B) Comparison statements. C) Dimensional analysis. D) Scenario analysis. E) Solvency analysis. Answer: A Topic: SHORT-TERM SOLVENCY RATIOS 7. Financial ratios that measure the firm's ability to pay its bills over the short run without undue stress are known as: A) Asset management ratios. B) Long-term solvency ratios. C) Short-term solvency ratios. D) Profitability ratios. E) Market value ratios. Answer: C Topic: CURRENT RATIO 8. The current ratio is measured as: A) Current assets minus current liabilities. B) Current assets divided by current liabilities. C) Current liabilities minus inventory, divided by current assets. D) Cash on hand divided by current liabilities. E) Current liabilities divided by current assets. Answer: B Topic: QUICK RATIO 9. The quick ratio is measured as: A) Current assets divided by current liabilities. B) Cash on hand plus current liabilities, divided by current assets. C) Current liabilities divided by current assets, plus inventory. D) Current assets minus inventory, divided by current liabilities. E) Current assets minus inventory minus current liabilities.
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Answer: D
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Topic: CASH RATIO 10. The cash ratio is measured as: A) Current assets divided by current liabilities. B)
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Chapter 3 Test Bank - CHAPTER 3 Working with Financial...

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