#1
Which of the following is considered a current liability?
Accounts payable
ExplanationCurrent obligations to suppliers.
#2
What is the primary purpose of a note payable?
To record short-term loans
ExplanationRecording written promises for short-term borrowing.
#3
When are current liabilities usually due?
Within one year
ExplanationShort-term obligations due in a year.
#4
Which financial statement includes current liabilities?
Balance sheet
ExplanationSnapshot of a company's financial position.
#5
Which of the following is NOT typically considered a current liability?
Notes payable due in two years
ExplanationLong-term nature, not due within a year.
#6
How does a company classify short-term borrowings in its financial statements?
As current liabilities
ExplanationShort-term debts categorized in current liabilities.
#7
What is the formula to calculate the current ratio?
Current Assets / Current Liabilities
ExplanationMeasure of a company's ability to cover short-term obligations.
#8
Which of the following is a type of current liability that represents taxes owed but not yet paid?
Accrued liabilities
ExplanationTaxes incurred but not yet settled.
#9
Which of the following is NOT a typical example of a current liability?
Accounts receivable
ExplanationAccounts receivable are assets, not liabilities.
#10
Which of the following is considered a contingent liability?
Warranty liability
ExplanationPotential obligation depending on future events.
#11
Which financial ratio is calculated using current liabilities?
Current Ratio
ExplanationRatio assessing short-term solvency.
#12
What happens to the current ratio if current liabilities increase?
Decreases
ExplanationMore liabilities relative to assets affect the ratio negatively.
#13
What is the effect on working capital if a company pays off a current liability?
Increases
ExplanationReducing short-term debts boosts working capital.
#14
What does a high current ratio indicate about a company's liquidity?
Higher liquidity
ExplanationStrong ability to cover short-term obligations.
#15
What is the effect on the current ratio if current assets decrease?
Decreases
ExplanationReduced numerator in the ratio lowers the overall value.
#16
How do you calculate the quick ratio?
(Current Assets - Inventory) / Current Liabilities
ExplanationQuick measure of a company's ability to meet short-term liabilities.