Current Liabilities and Financial Ratios Quiz

Accounts payable represents money owed by a company to its suppliers for goods or services purchased on credit.

Short-term notes payable represent obligations due within one year and are classified as current liabilities.

Accrued liabilities like wages payable represent expenses incurred but not yet paid, recorded as liabilities.

Accounts payable are short-term obligations arising from purchasing goods or services on credit.

Accounts payable represent amounts owed by a company to its suppliers for goods or services received.

The current ratio calculates a company's ability to pay off its short-term obligations with its short-term assets.

A current ratio less than 1 signifies that a company does not have enough current assets to cover its short-term liabilities.

Long-term debt is not considered a component of working capital, which focuses on current assets and liabilities.

The inventory turnover ratio measures how efficiently a company sells its inventory.

Notes payable due in 10 years are long-term liabilities, not current liabilities.

A high current ratio suggests that a company has sufficient current assets to cover its short-term liabilities.

The quick ratio assesses a company's ability to meet short-term liabilities using its most liquid assets, excluding inventory.

Return on assets ratio measures how effectively a company utilizes its assets to generate profits.

Debt-to-equity ratio compares a company's debt with its shareholders' equity.

The quick ratio evaluates a company's ability to meet short-term obligations using highly liquid assets.

Net profit margin ratio measures the proportion of revenue that translates into net income after all expenses.