Peartree Company Provides the Following Data How Much Is the Current Ratio at Year-End 2017?
A)17

question 50

Multiple Choice

Peartree Company provides the following data: $\begin{array}{|l|r|r|}\hline \text { BALANCE SHEET } & 31 \text { Dec } 2017 & 31 \text { Dec } 2016 \\\hline \text { Cash } & \$ 21000 & \$ 18000 \\\hline \text { Accounts receivable, net } & 31000 & 35000 \\\hline \text { Inventory } & 53000 & 25000 \\\hline \text { PP\&E, net } & 120000 & 90000 \\\hline \text { Total assets } & \$ 225000 & \$ 168000 \\\hline\\\hline \text { Accounts payable } & \$ 4000 & \$ 6000 \\\hline \text { Accrued liabilities } & 2000 & 1000 \\\hline \text { Long-term loans payable } & 84000 & 90000 \\\hline \text { Total liabilities } & \$ 90000 & \$ 97000 \\\hline\\\hline \text { Share capital } & \$ 30000 & \$ 2000 \\\hline \text { Retained earnings } & 105000 & 69000 \\\hline \text { Total shareholders' equity } & \$ 135000 & \$ 71000 \\\hline \text { Total liabilities and } & & \\\text { Shareholders'equity } & \$ 225000 & \$ 168000\\\hline\end{array}$ How much is the current ratio at year-end 2017?

• A)17.5
• B)0.5
• C)3.5
• D)16.1

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Definitions:

Voting Agreement

A legal pact among shareholders to vote their shares in a certain manner.

Business Judgment Rule

A legal principle that protects company directors from liability for decisions made in good faith and in the interest of the company.

Good Faith

The honest intention to act without taking an unfair advantage over another party during the execution of deals, contracts, and transactions.

Ultra Vires Defense

A legal defense arguing that a corporation acted beyond the scope of its powers as defined in its charter or laws.