Ratio Analysis Paper 3

1

Windham Company has current assets of $400,000 and current liabilities of $500,000. Windham Company’s current ratio will be increased by






2

Peters Company has a 2-to-1 current ratio. This ratio would increase to more than 2 to 1 if






3

Merit, Inc., uses the direct write-off method to account for uncollectible accounts receivable. If the company subsequently collects an account receivable that was written off in a prior accounting period, the effect of the collection of the account receivable on Merit’s current ratio and total working capital would be Current Ratio Working Capital






4

The following transactions occurred during a company’s first year of operations:
I. Purchased a delivery van for cash
II. Borrowed money by issuance of short-term debt
III. Purchased treasury stock
Which of the items above caused a change in the amount of working capital?






5

Birch Products, Inc., has the following current assets:
Cash $250,000
Marketable securities 100,000
Accounts receivable 800,000
Inventories 1,450,000
If Birch’s current liabilities are $1,300,000 the firm’s






6

Davis Retail, Inc., has total assets of $7,500,000 and a current ratio of 2.3 times before purchasing $750,000 of merchandise on credit for resale. After this purchase, the current ratio will






7

Markowitz Company increased its allowance for uncollectible accounts. This adjustment will






8

Garstka Auto Parts must increase its acid test ratio above the current 0.9 level in order to comply with the terms of a loan agreement. Which one of the following actions is most likely to produce the desired results?






9

The owner of a chain of grocery stores has bought a large supply of mangoes and paid for the fruit with cash. This purchase will adversely impact which one of the following?






10

Both the current ratio and the quick ratio for Spartan Corporation have been slowly decreasing. For the past two years, the current ratio has been 2.3-to-1 and 2.0-to-1. During the same time period, the quick ratio has decreased from 1.2-to-1 to 1.0-to-1. The disparity between the current and quick ratios can be explained by which one of the following?






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