Freiman Corporation's Most Recent Balance Sheet and Income Statement Appear

question 257

Multiple Choice

Freiman Corporation's most recent balance sheet and income statement appear below:
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
$\begin{array}{lr}\text { Sales (all on account) }&\$ 1,310 \\\text {Cost of goods sold. }&780 \\\text {Gross margin. }&530 \\\text {Selling and administrative expense }&359 \\\text {Net operating income }&171 \\\text {Interest expense }& 35 \\\text {Net income before taxes }&136 \\\text { income taxes (30\%) }& 41 \\\text {Net income }& 95\end{array}$
-The acid-test (quick) ratio at the end of Year 2 is closest to:

• A) 0.96
• B) 1.36
• C) 1.50
• D) 1.93

---

Definitions:

Master Budget

A comprehensive financial plan for an organization's upcoming year, summarizing all of its plans and financial activities.

Budget

A financial plan that estimates income and expenditures for a future period, often used as a guide for financial decision-making and resource allocation.

Budgetary Control Process

A method for managers to set financial and operational goals with budgets, monitor performance, and take corrective actions to stay on track with objectives.

Budget

An estimate of income and expenditure for a set period of time, serving as a financial plan and control method.