#1
Which of the following is considered a current liability?
Long-term loan
Accounts payable
Property, plant, and equipment
Common stock
#2
What is the primary purpose of a note payable?
To finance long-term investments
To record short-term loans
To purchase inventory
To pay dividends to shareholders
#3
When are current liabilities usually due?
Within one year
Within six months
Within three years
More than five years
#4
Which financial statement includes current liabilities?
Income statement
Statement of cash flows
Balance sheet
Statement of retained earnings
#5
Which of the following is NOT typically considered a current liability?
Accounts payable
Wages payable
Notes payable due in two years
Accrued expenses
#6
How does a company classify short-term borrowings in its financial statements?
As long-term liabilities
As equity
As current liabilities
As revenue
#7
What is the formula to calculate the current ratio?
Current Assets / Total Assets
Total Assets / Current Liabilities
Current Liabilities / Total Assets
Current Assets / Current Liabilities
#8
Which of the following is a type of current liability that represents taxes owed but not yet paid?
Accounts payable
Notes payable
Accrued liabilities
Deferred revenue
#9
Which of the following is NOT a typical example of a current liability?
Accounts receivable
Wages payable
Notes payable
Accrued expenses
#10
Which of the following is considered a contingent liability?
Accounts payable
Notes payable
Warranty liability
Salaries payable
#11
What is the purpose of classifying liabilities as current?
To indicate their long-term nature
To show their maturity within a year
To demonstrate their importance in financial statements
To align with accounting standards
#12
Which of the following is NOT an example of an accrued liability?
Interest payable
Utilities payable
Accounts payable
Wages payable
#13
Which of the following is a characteristic of current liabilities?
Expected to be settled in more than one year
Include long-term loans
Obligations that arise from normal operations
Not reported on the balance sheet
#14
What is the main difference between accounts payable and notes payable?
Accounts payable are short-term, while notes payable are long-term
Accounts payable are obligations to suppliers, while notes payable are written promises to pay a specific amount
Accounts payable are always interest-bearing, while notes payable are not
Accounts payable are reported on the income statement, while notes payable are reported on the balance sheet
#15
What is the purpose of recording accrued liabilities?
To adjust financial statements for revenues earned but not yet received
To record expenses incurred but not yet paid
To classify liabilities as current or long-term
To recognize future obligations that may arise
#16
Which financial ratio is calculated using current liabilities?
Return on Assets (ROA)
Current Ratio
Debt to Equity Ratio
Earnings Per Share (EPS)
#17
What happens to the current ratio if current liabilities increase?
Increases
Decreases
Remains unchanged
Cannot be determined
#18
What is the effect on working capital if a company pays off a current liability?
Increases
Decreases
Remains unchanged
Cannot be determined
#19
What does a high current ratio indicate about a company's liquidity?
Higher liquidity
Lower liquidity
No effect on liquidity
Cannot be determined
#20
What is the effect on the current ratio if current assets decrease?
Increases
Decreases
Remains unchanged
Cannot be determined
#21
How do you calculate the quick ratio?
(Current Assets - Inventory) / Current Liabilities
Current Assets / Current Liabilities
(Current Assets + Inventory) / Current Liabilities
Total Assets / Total Liabilities
#22
Which of the following is a disadvantage of having too many current liabilities?
Decreased liquidity
Increased solvency
Higher risk of bankruptcy
Stable financial position
#23
What does a decrease in current liabilities typically indicate?
Improved liquidity
Decreased solvency
Higher risk of insolvency
Decreased profitability
#24
How does the issuance of short-term notes payable affect a company's liquidity?
Increases liquidity
Decreases liquidity
No impact on liquidity
Cannot be determined
#25
Which of the following ratios does not directly involve current liabilities?
Quick ratio
Debt to equity ratio
Current ratio
Return on assets