Financial Accounting - Liabilities and Interest Quiz

Test your knowledge on current & long-term liabilities, interest calculation, debt management, & financial ratios.

Practice Learn Test

Which of the following is a current liability?

Accounts Receivable

Notes Payable

Common Stock

Land

Which financial ratio measures a company's ability to pay off short-term liabilities with its most liquid assets?

Debt-to-Equity Ratio

Current Ratio

Return on Equity

Earnings per Share

Which of the following is a liability?

Prepaid rent

Accumulated depreciation

Inventory

Accounts payable

What is the formula to calculate interest expense?

Principal amount * Interest rate

Principal amount * (1 + Interest rate)

Principal amount * Time period

Principal amount * Interest rate * Time period

Which financial statement reports a company's long-term debt?

Income Statement

Balance Sheet

Statement of Cash Flows

Statement of Retained Earnings

What does the term 'accrued liabilities' refer to in accounting?

Liabilities incurred but not yet recorded

Liabilities recorded but not yet paid

Liabilities paid in advance

Liabilities that are no longer valid

Which of the following is an example of a contingent liability?

Accounts Payable

Bank Loan

Lawsuit against the company

Salaries payable

What does the term 'deferred revenue' represent in accounting?

Revenue that has been recognized but not yet received

Revenue that has been received but not yet recognized

Expenses that have been paid in advance

Expenses that have been recognized but not yet paid

Which of the following is an example of a long-term liability?

Utilities Expense

Accounts Payable

Salaries Payable

Bonds Payable

#10

How does the market interest rate affect the present value of a bond?

Higher market interest rate increases present value

Higher market interest rate decreases present value

Market interest rate does not affect present value

Market interest rate affects the future value

#11

What is the purpose of the debt-to-equity ratio?

To measure a company's profitability

To evaluate a company's liquidity

To assess a company's financial leverage

To determine a company's solvency

#12

What is the effect of recording a bond issued at a discount on the balance sheet?

Decreases liabilities and increases equity

Increases liabilities and decreases equity

No effect on liabilities and equity

Decreases assets and increases liabilities

#13

What is the difference between a finance lease and an operating lease?

Finance lease transfers ownership to lessee, while operating lease does not

Operating lease transfers ownership to lessee, while finance lease does not

Finance lease does not require lease payments, while operating lease does

Operating lease does not require asset depreciation, while finance lease does

#14

How is interest expense calculated for an installment note payable?