Chapter 1 Practice Questions
1. Which of the following is not a current asset?
A. Inventory
B. Accounts receivable
C. Cash
D. Trademarks
2. The best place to look for a current list of the long-term debts which a company that first issued its securities five years ago must repay is its:
A. Prospectus
B. Form 144
C. Balance sheet
D. Income statement
3. All of the following are components of a company’s quick ratio except:
A. Inventory
B. Accounts receivable
C. Cash
D. Current liabilities
4. An investor calculating the investing merits of a payment or payments not yet received might potentially use all of the following except:
A. Present value
B. Net present value
C. Future value
D. Internal rate of return
5. Jim wishes to calculate the future value of $1,000 three years from now if it earns 8%. Which of the following could be used to calculate this amount?
A. $1,000 / (1 + 0.08)3
B. $1,000 × (1 + 0.08)3
C. 3 × $1,000 × (1 + 0.08)
D. 3 × $1,000 / (1 + 0.08)
6. Which balance sheet item is deducted from current assets when calculating the acid test or quick ratio?
A. Accounts receivable
B. Inventory
C. Taxes
D. Equipment
7. My ABC Company sells personalized ABC books and has a current ratio of 4:1. If the company has $40,000 in current assets, how much working capital does it have?
A. $40,000
B. $30,000
C. $10,000
D. $160,000
8. You have received the following facts about various companies. One of the pieces of information has an error. Which company is most likely to have the error?
A. Company A has a quick ratio of 0.2
B. Company B has a working capital of -$30 million
C. Company C has a P/E of 15
D. Company D has a current ratio of -2
9. Steve bought 100 shares of XYZ Company at $50. Two years later, he sold the shares for $60. Over the two years, Steve