12. Company A has a high Current Ratio relative to others in its industry, but a

Question

12. Company A has a high Current Ratio relative to others in its industry, but a low Quick Ratio. This may be indicative of (relative to others in the industry):

a.       More reliance on cash sales

b.      More discounting and therefore a higher cost of goods sold

c.       Higher Accounts Payable

d.      Higher Inventory

13. Which of the following is not a common shareholder right?

a.       Right to vote for a Board of Directors

b.      Right to receive dividends

c.       Right to vote to declare a dividend

d.      Right to pre-emptively maintain its overall share of a company

a.       Limited liability of its owners

b.      Centralized management

c.       Limited transferability of ownership

d.      Permanent life apart from its owners

a.       Default

b.      Interest rate changes

c.       Reinvestment

d.      Loss of principal when called

Explanation / Answer

12)d) Higher Inventory

Reason: as quick ratio = (current asset-inventory)/current liabilities . So it is low indicates inventory is high

13)C)Right to vote to declare a dividend

Reason; it is not share holder right.It depends on board of directors

14)C)Limited transferability of ownership

Reason: it is not feature of corporation

15) d)Loss of principal when called

Reason; if bond is called ,it pays call value of bond.So it is not risk

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