1. If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to
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Question
1. If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets ratio of 0.45, which of the following statements is correct?
A. Company A must make less profit than Company B.
B. Company A must have fewer assets than Company B.
C. Creditors own a smaller proportion of Company A than Company B.
D. Stockholders own a smaller proportion of Company A than Company B.
2. Suppose a company generally records revenues and expenses before receiving or making cash payments. Which of the following statements is not correct?
A. If revenues are rising, net income could result even though the company reports a net cash outflow from operating activities.
B. If revenues are falling, a net loss could result even though the company reports a net cash inflow from operating activities.
C. The income statement doesn't explain changes in cash because it focuses on just the operating results of the business.
D. Net income and net cash flows provided by operating activities will always agree.
3. If a company's gross salaries and wages are $30,000, and it withholds $4,500 for income taxes and $2,295 for FICA taxes, the journal entry to record the employees' pay should include a:
A. debit to Salaries and Wages Payable for $23,205.
B. credit to Salaries and Wages Payable for $23,205.
C. credit to Salaries and Wages Payable for $30,000.
D. debit to Salaries and Wages Expense for $23,205.
Explanation / Answer
1) D. Stockholders own a smaller proportion of Company A than Company
2) D. Net income and net cash flows provided by operating activities will always agree
3) A. debit to Salaries and Wages Payable for $23,205.
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