One problem with ratio analysis is that relationships can sometimes be manipulated. For example, if our current ratio is greater than 1.5, then borrowing on a short-term basis and using the funds to build up our cash account would cause the current ratio to INCREASE.
Answer the following statement true (T) or false (F)
False
Rationale: The key here is to recognize that if the CR is greater than 1.0, then a given increase in both current assets and current liabilities would lead to a decrease in the CR. The reverse would hold if the initial CR were less than 1.0. Here the initial CR is greater than 1.0, so borrowing on a short-term basis to build the cash account would lower the CR. For example:
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a. Current assets b. Current liabilities c. Long-term assets d. Longterm liabilities and stockholders' equity
When callable preferred stock is called and surrendered, the shareholder is entitled to all of the following except
a. dividends in arrears. b. a prorated portion of the current period's dividend. c. a call premium. d. the market value of the stock.
Which of the following correctly describes the accounting for indirect labor costs?
A) Indirect labor costs are product costs and are expensed as incurred. B) Indirect labor costs are period costs and are expensed as incurred. C) Indirect labor costs are product costs and are expensed when the manufactured product is sold. D) Indirect labor costs are period costs and are expensed when the manufactured product is sold.
A computer retailer can purchase a discontinued notebook PC for $800 and wants to obtain a 25 percent markup at retail. What retail price should be charged?
a. $800 b. $960 c. $1,000 d. $1,067