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NEW QUESTION: 1
Skimming cases can more likely to be detected by:
A. occupational frauds
B. Internal controls
C. Internal audits
D. Accidents
Answer: D
NEW QUESTION: 2
Enigma Corporation anticipates that it will have a current ratio of less than one at the end of 2001.
What would be the effect on Enigma's current ratio if it raised funds through a short-term loan on the balance sheet date at the end of the year?
A. Worsen the current ratio
B. Improve the current ratio
C. Have no effect on the current ratio
Answer: B
Explanation:
Current assets are already less than current liabilities and so the current ratio (current asset / current liabilities) is less than one. If one were to borrow funds through a short-term loan at the end of the year, then this would increase both current assets (as the new funds are represented as cash) and current liabilities (by the amount of the loan). The effect of this equal increase in current assets and current liabilities will increase the current ratio. This can be proved easily by testing this with numbers. Suppose that a company had current assets of $300 and current liabilities of $400. The current ratio is 75%.
Suppose that the company then borrows $100 in the form of a short-term loan at the year-end. The calculation of the current ratio now becomes $400 divided by $500 giving a current ratio of 80%.
NEW QUESTION: 3
A. Option C
B. Option A
C. Option B
D. Option D
Answer: C
Explanation:
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