Table 4.

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Greene Landscaping
Balance Sheet
December 31, 2008

Assets Liabilities

Cash $15,000 Accounts payable $ 22,000

Accounts Receivable 30,000 Salaries payable 12,000
Supplies 4,000 Unearned service revenue
25,000
Prepaid insurance 8,000 Total liabilities 59,000
Equipment $85,000
Less: Accumulated Owner's Equity
depreciation 10,000 75,000
Seth Greene, capital 73,000
Total liabilities and
Total assets $132,000 owner's equity $132,000

91) The Balance Sheet for Green Landscaping is presented above in Table 4.1. Which of the following is 91)
the current ratio?
A) .25 B) .97 C) .68 D) 1.27

92) The Balance Sheet for Green Landscaping is presented above in Table 4.1. Which of the following is 92)
the debt ratio?
A) 1.04 B) .45 C) 39 D) .79

93) Which of the following is considered a rule-of-thumb strong current ratio for businesses? 93)
A) .8 B) 1.5 C) 1.0 D) .6

94) Which of the following is considered a rule-of-thumb safe debt ratio for businesses? 94)
A) .6 B) 1.5 C) 1.0 D) .8

95) Adkins Company has a current ratio of 1.0 and a debt ratio of .7. Wilson Company has a current 95)
ratio of 1.4 and a debt ratio of .5. Which of the following statements is true.
A) The two companies' debt ratios and current ratios vary in different directions and these
results do not make sense.
B) Adkins appears to be in better financial shape than Wilson.
C) Wilson appears to be in better financial shape than Adkins.
D) The two companies' debt ratios and current ratios vary in different directions and the
companies appear to be in similar financial shape.

96) Which of the following does the current ratio measure? 96)
A) The current ratio measures the company's overall ability to pay liabilities.
B) The current ratio measures the company's ability to pay current liabilities with current assets.
C) The current ratio measures the proportion of the company's assets that are financed with debt.
D) Both B and C are true.

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