Reference no: EM132714635

Problem 1: A classified balance sheet:

Multiple Choice

A. Measures a company's ability to pay its bills on time.
B. Organizes assets and liabilities into important subgroups that provide more information.
C. Broadly groups items into assets, liabilities, and equity.
D. Reports operating, investing, and financing activities.
E. Reports the effect of profit and withdrawals on owner's capital.

Problem 2: All of the following regarding the current ratio are true except:

Multiple Choice

A. Current ratio is calculated by dividing current assets by current liabilities.
B. Current ratio helps to assess a company's ability to pay its debts in the near future.
C. Current ratio does not affect a creditor's decision on whether to allow a company to buy on credit.
E. Current ratio can affect a creditor's decision about whether to lend money to a company.
D. Current ratio can reveal challenges in covering short-term obligations if it is less than 1.