The debt to total assets ratio is computed by dividing

The debt to total assets ratio is computed by dividing

a. current liabilities by total assets.
b. long-term liabilities by total assets.
c. total liabilities by total assets.
d. total assets by total liabilities.


Answer: total liabilities by total assets

The times interest earned ratio is computed by dividing

The times interest earned ratio is computed by dividing

a. net income by interest expense.
b. income before taxes by interest expense.
c. income before income taxes and interest expense by interest expense.
d. net income and interest expense by interest expense.


Answer: income before income taxes and interest expense by interest expense

Note disclosures for long-term debt generally include all of the following except

Note disclosures for long-term debt generally include all of the following except

a. assets pledged as security.
b. call provisions and conversion privileges.
c. restrictions imposed by the creditor.
d. names of specific creditors.


Answer: names of specific creditors

Which of the following must be disclosed relative to long-term debt maturities and sinking fund requirements?

Which of the following must be disclosed relative to long-term debt maturities and sinking fund requirements?

a. The present value of future payments for sinking fund requirements and long-term debt maturities during each of the next five years.
b. The present value of scheduled interest payments on long-term debt during each of the next five years.
c. The amount of scheduled interest payments on long-term debt during each of the next five years.
d. The amount of future payments for sinking fund requirements and long-term debt maturities during each of the next five years.


Answer: The amount of future payments for sinking fund requirements and long-term debt maturities during each of the next five years

Long-term debt that matures within one year and is to be converted into stock should be reported

Long-term debt that matures within one year and is to be converted into stock should be reported

a. as a current liability.
b. in a special section between liabilities and stockholders' equity.
c. as noncurrent.
d. as noncurrent and accompanied with a note explaining the method to be used in its liquidation.


Answer: as noncurrent and accompanied with a note explaining the method to be used in its liquidation

When a business enterprise enters into what is referred to as off-balance-sheet financing, the company

When a business enterprise enters into what is referred to as off-balance-sheet financing, the company

a. is attempting to conceal the debt from shareholders by having no information about the debt included in the balance sheet.
b. wishes to confine all information related to the debt to the income statement and the statement of cash flow.
c. can enhance the quality of its financial position and perhaps permit credit to be obtained more readily and at less cost.
d. is in violation of generally accepted accounting principles.


Answer: can enhance the quality of its financial position and perhaps permit credit to be obtained more readily and at less cost