FI 302 Exam 2 (Parisi) Prep Questions
With 100% Correct Answers 2026-2027
Updated.
1) If you were given the components of current assets and of current liabilities, what ratio(s)
could you compute?
A) Acid test or quick ratio
B) Average collection period
C) Current ratio
D) Both A and C
E) All of the above - Answer D) Both A and C
2) The debt ratio is a measure of a firm's
A) leverage.
B) profitability.
C) liquidity.
D) efficiency. - Answer A) leverage.
3) Which of the following statements is true?
A) Current assets consist of cash, accounts receivable, inventory, and net plant, property, and
equipment.
B) The quick ratio is a more restrictive measure of a firm's liquidity than the current ratio.
C) For the average firm, inventory is considered to be more "liquid" than accounts receivable.
D) A successful firm's current liabilities should always be greater than its current assets. -
Answer B) The quick ratio is a more restrictive measure of a firm's liquidity than the current
ratio.
4) Which of the following transactions does NOT affect the quick ratio?
A) Land held for investment is sold for cash.
B) Equipment is purchased and is financed by a long-term debt issue.
C) Inventories are sold for cash.
D) Inventories are sold on a credit basis. - Answer B) Equipment is purchased and is financed
by a long-term debt issue.
5) Given an accounts receivable turnover of 8 and annual credit sales of $362,000, the average
collection period (360-day year) is
,A) 90 days.
B) 45 days.
C) 75 days.
D) 60 days. - Answer B) 45 days.
6) The question "Did the common stockholders receive an adequate return on their
investment?" is answered through the use of
A) liquidity ratios.
B) profitability ratios.
C) coverage ratios.
D) leverage ratios. - Answer B) profitability ratios.
Smith Company Balance Sheet and selected Income Statement data
Assets:
Cash and marketable securities $300,000
Accounts receivable
2,215,000
Inventories
1,837,500
Prepaid expenses
24,000
Total current assets
$3,286,500
Fixed assets
2,700,000
Less: accumulated depreciation 1,087,500
Net fixed assets
$1,612,500
Total assets
$4,899,000
Liabilities:
Accounts payable
$240,000
Notes payable
, 825,000
Accrued taxes
42,500
Total current liabilities
$1,107,000
Long-term debt
975,000
Owner's equity
2,817,000
Total liabilities and owner's equity $4,899,000
Net sales (all credit)
$6,375,000
Less: Cost of goods sold
4,312,500
Selling and administrative expense 1,387,500
Depreciation expense
135,000
Interest expense
127,000
Earnings before taxes
$412,500
Income taxes
225,000
Net income
$187,500
Common stock dividends
$97,500
Change in retained earnings
$90,000 - Answer ...
7) Based on the information in Table 1, the current ratio is
A) 2.97.
B) 1.46.
C) 2.11.
D) 2.23. - Answer A) 2.97.
With 100% Correct Answers 2026-2027
Updated.
1) If you were given the components of current assets and of current liabilities, what ratio(s)
could you compute?
A) Acid test or quick ratio
B) Average collection period
C) Current ratio
D) Both A and C
E) All of the above - Answer D) Both A and C
2) The debt ratio is a measure of a firm's
A) leverage.
B) profitability.
C) liquidity.
D) efficiency. - Answer A) leverage.
3) Which of the following statements is true?
A) Current assets consist of cash, accounts receivable, inventory, and net plant, property, and
equipment.
B) The quick ratio is a more restrictive measure of a firm's liquidity than the current ratio.
C) For the average firm, inventory is considered to be more "liquid" than accounts receivable.
D) A successful firm's current liabilities should always be greater than its current assets. -
Answer B) The quick ratio is a more restrictive measure of a firm's liquidity than the current
ratio.
4) Which of the following transactions does NOT affect the quick ratio?
A) Land held for investment is sold for cash.
B) Equipment is purchased and is financed by a long-term debt issue.
C) Inventories are sold for cash.
D) Inventories are sold on a credit basis. - Answer B) Equipment is purchased and is financed
by a long-term debt issue.
5) Given an accounts receivable turnover of 8 and annual credit sales of $362,000, the average
collection period (360-day year) is
,A) 90 days.
B) 45 days.
C) 75 days.
D) 60 days. - Answer B) 45 days.
6) The question "Did the common stockholders receive an adequate return on their
investment?" is answered through the use of
A) liquidity ratios.
B) profitability ratios.
C) coverage ratios.
D) leverage ratios. - Answer B) profitability ratios.
Smith Company Balance Sheet and selected Income Statement data
Assets:
Cash and marketable securities $300,000
Accounts receivable
2,215,000
Inventories
1,837,500
Prepaid expenses
24,000
Total current assets
$3,286,500
Fixed assets
2,700,000
Less: accumulated depreciation 1,087,500
Net fixed assets
$1,612,500
Total assets
$4,899,000
Liabilities:
Accounts payable
$240,000
Notes payable
, 825,000
Accrued taxes
42,500
Total current liabilities
$1,107,000
Long-term debt
975,000
Owner's equity
2,817,000
Total liabilities and owner's equity $4,899,000
Net sales (all credit)
$6,375,000
Less: Cost of goods sold
4,312,500
Selling and administrative expense 1,387,500
Depreciation expense
135,000
Interest expense
127,000
Earnings before taxes
$412,500
Income taxes
225,000
Net income
$187,500
Common stock dividends
$97,500
Change in retained earnings
$90,000 - Answer ...
7) Based on the information in Table 1, the current ratio is
A) 2.97.
B) 1.46.
C) 2.11.
D) 2.23. - Answer A) 2.97.
