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NEW QUESTION: 1
A firm has entered into a long-term purchase obligation. This will allow the firm to obtain raw materials for operations at a known price over the next 6 years. This obligation must be reflected on the balance sheet as:
A. a footnote disclosure.
B. a long-term liability.
C. none of these answers.
D. a current liability until the first purchase occurs.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
It is important to recognize that liabilities arise and are recognized on the balance-sheet only if the firm has consumed at least a part of the services or goods under the contract. Until then, a liability is not admitted since there is no corresponding asset or equity that has been generated (a similar principle holds for the recognition of assets). However, due to the bonding nature of the contract, it must be disclosed in footnotes along with the relevant details so that analysts can figure in the impact of all such agreements while evaluating the future health of the firm.
NEW QUESTION: 2
The times-interest-earned ratio is primarily an indication of:
A. Solvency.
B. Liquidity.
C. Profitability.
D. Asset management.
Answer: A
Explanation:
The times-interest-earned ratio equals profit or loss before taxes and interest divided by interest. It measures the extent to which operating profit can decline before the entity is unable to meet its annual interest cost. Thus is a measure of debt-paying capacity solvency.
NEW QUESTION: 3
What change must be made to the Guest OS kernel to support paravirtualization?
A. The Guest OS kernel must rewrite modules to communicate with the hypervisor.
B. The Guest OS kernel must replace privileged CPU instructions with calls to the hypervisor.
C. None; the unmodified Guest OS kernel can communicate directly with the hardware CPU.
D. None; the unmodified Guest OS kernel communicates with the CPU through an emulated CPU which is provided by the hypervisor.
Answer: B