Which  of the flowing ratios provides a solvency measure that shows the margin  of safety of note holders or bondholders and also gives an indication  of the potential ability of the business to borrow additional funds on a  long-term basis?

Question 72
At  the beginning of the fiscal year, the balance sheet showed assets of  $1,364 and owners equity of $836. During the year, assets increased $ 74  and liabilities decreased $38. Owner’s equity at the end of the year  totaled:
(a) $836

(b) $872

(c) $948

(d) $1438

Question 73

The number of times interest charges are earned is computed as:

(a) Net income plus interest charges, divided by interest charges.

(b) Income before income tax plus interest charges, divided by interest charges.

(c) Net income divided by interest charges.

(d) Income before income tax divided by interest charges.

Question 74
The  tendency of the rate earned on stockholders equity to vary  disproportionately from the rate earned on total assets is sometimes  referred to as:

(a) Leverage.

(b) Solvency.

(c) Yield.

(d)  Quick assets.

Question 75

Which method of evaluating capital investment proposals uses present  value concepts to compute the rate of return from the net cash flows  expected from capital investment proposals?

(a) Internal rate of return

(b) Cash Payback

(c) Net present value

(d) Average rate of return

Question 76
Statements in which all items are expressed only in relative terms (percentages of a common bas )are:

(a) Horizontal statements.

(b) Percentage statements

(c) Vertical statements.

(d) Common-size statements.

Question 77
The reason for recoding a prepaid expense as a current asset is:

(a) That the prepaid item will be returned for a cash refund.

(b) That the prepaid item has not yet become an expense.

(c) That the expense has been incurred but not yet paid.

(d) To avoid recognizing an expense so net income will be higher for the current accounting period.

Question 78
Current  generally accepted Accounting Principles and auditing standards require  that financial statements of an entity for the reporting period to  include:
(a) Earnings and gross receipts of cash for the period.

(b) Projected earnings for the subsequent period.

(c) Financial position at the end of the period.

(d) Current market values of all assets at the end of the period.

Question 79
Which  of the flowing ratios provides a solvency measure that shows the margin  of safety of note holders or bondholders and also gives an indication  of the potential ability of the business to borrow additional funds on a  long-term basis?

(a) Ratio of fixed assets to long-term liabilities.

(b) Ratio of net sales to assets

(c) Number of days’ sales in receivables

(d) Rate earned on stockholders’ equity

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