Chapter 17—Financial Statement Analysis

TRUE/FALSE

20. The ratio of the sum of cash, receivables, and marketable

securities to current liabilities is referred to as the current ratio.

ANS: F PTS: 1 DIF: Easy OBJ: 17-02

NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis

21. A balance sheet shows cash, $75,000; marketable securities,

$115,000; receivables, $150,000 and $222,500 of inventories.
Current liabilities are $225,000. The current ratio is 2.5 to 1.

ANS: T PTS: 1 DIF: Easy OBJ: 17-02

NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis

22. If a firm has a current ratio of 2, the subsequent receipt of a 60-

day note receivable on account will cause the ratio to decrease.

ANS: F PTS: 1 DIF: Easy OBJ: 17-02

NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis

23. If a firm has a quick ratio of 1, the subsequent payment of an

account payable will cause the ratio to increase.

ANS: F PTS: 1 DIF: Easy OBJ: 17-02

NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis
24. Solvency analysis focuses on the ability of a business to pay its
current and noncurrent liabilities.

ANS: T PTS: 1 DIF: Easy OBJ: 17-02

NAT: AACSB Analytic | AICPA FN-Measurement |
ACBSP-APC-23-Financial Statement Analysis