Ratio Analysis Paper 2

1

In analyzing the short-term liquidity of a firm, many analysts prefer to use the quick (or acid test) ratio rather than the current ratio. The primary reason for this preference is that the






2

A corporation has $90 million in current assets. If the corporation has a current ratio of 1.2 and a quick ratio of 0.9, what is net working capital?






3

Bond Corporation has a current ratio of 2 to 1 and a quick ratio (acid test) of 1 to 1. A transaction that would change Bond’s quick ratio but not its current ratio is the






4

Rice, Inc., uses the allowance method to account for uncollectible accounts. An account receivable that was previously determined uncollectible and written off was collected during May The effect of the collection on Rice’s current ratio and total working capital is
Current Ratio
Working Capital






5

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets exceeded total current liabilities both before and after the transaction described. Further assume that Depoole has positive profits during the year and a credit balance throughout the year in its retained earnings account. Depoole’s payment of a trade account payable of $64,500 will






6

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets exceeded total current liabilities both before and after the transaction described. Further assume that Depoole has positive profits during the year and a credit balance throughout the year in its retained earnings account. Depoole’s purchase of raw materials for $85,000 on open account will






7

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets exceeded total current liabilities both before and after the transaction described. Further assume that Depoole has positive profits during the year and a credit balance throughout the year in its retained earnings account. Depoole’s collection of a current accounts receivable of $29,000 will






8

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets exceeded total current liabilities both before and after the transaction described. Further assume that Depoole has positive profits during the year and a credit balance throughout the year in its retained earnings account. Obsolete inventory of $125,000 was written off by Depoole during the year. This transaction






9

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets exceeded total current liabilities both before and after the transaction described. Further assume that Depoole has positive profits during the year and a credit balance throughout the year in its retained earnings account. Depoole’s issuance of serial bonds in exchange for an office building with the first installment of the bonds due late this year,






10

Depoole Company is a manufacturer of industrial products that uses a calendar year for financial reporting purposes. Assume that total quick assets exceeded total current liabilities both before and after the transaction described. Further assume that Depoole has positive profits during the year and a credit balance throughout the year in its retained earnings account. Depoole’s early liquidation of a long-term note with cash affects the






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