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What is its new current ratio

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Q1. Originally, Falcon Corporation's current assets are $400 and current liabilities are $250. If Falcon pays off its accounts payable of $150 with cash, what is its new current ratio?

-2.2

-4.0

-3.2

-2.5

Q2. All of the following items are consistent with earnings being informative about current performance but not informative about future earnings except:

-The firm recognizes an unexpected gain from a one-time event.

-The firm recognizes a fair value gain on a financial asset as a result of a favorable move in interest rates.

-The firm experiences a large jump in sales and earnings as a result of successful research and development of a new product.

-The firm recognizes additional expenses because of unusually large pre-opening costs associated with new stores.

Q3. An analyst decides to make adjustments to a company's financial statements in order to make the statements more useful for profitability analysis and for forecasting future earnings. Which of the following would not require an adjustment to the financial statements?

-The company reports a loss from discontinuing a product line.

-The company changes the useful life of its equipment from 3 years to 7 years.

-The company signs a new contract with a customer.

-The company incurs a charge from restructuring its operations.

Reference no: EM133025211

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