Asked by
Dominique Likus
on Dec 09, 2024
Verified
Assume a firm's current ratio equals 3.1. Which of the following actions would increase it?
A) Discarding and writing off spoiled inventory.
B) Receiving a full cash payment on an account receivable.
C) Paying off a short-term bank loan with the proceeds from new long-term debt.
D) Purchasing new fixed assets using the proceeds from a new stock issue.
E) Buying inventory on credit, thereby increasing accounts payable.
Current Ratio
A metric that assesses an organization's capability to cover its current liabilities with its existing assets.
Short-Term Bank Loan
A loan obtained from a bank that has a maturity of one year or less.
Accounts Payable
Money owed by a company to its creditors for products or services that have been delivered or used but not yet paid for.
- Scrutinize the ingredients and impacts of several financial ratios, including profitability, liquidity, and solvency ratios.
- Analyze an organization's competence in covering short-duration liabilities and sustaining operations independently of extra monetary contributions.
Verified Answer
BL
Learning Objectives
- Scrutinize the ingredients and impacts of several financial ratios, including profitability, liquidity, and solvency ratios.
- Analyze an organization's competence in covering short-duration liabilities and sustaining operations independently of extra monetary contributions.