If a Company's Current Ratio Increases from 1

question 89

Multiple Choice

If a company's current ratio increases from 1.2 to 1.4 from one year to the next, and its quick ratio decreases from 0.2 to 0.15 over the same time period, this indicates:

• A)the liquidity must have increased.
• B)the accounts receivable have decreased.
• C)the inventory management should be further examined.
• D)the current liabilities have decreased.

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Definitions:

Activity-Based Costing

A costing methodology that assigns costs to products or services based on the activities they require for production.

Machine-Hours

A measure of production time using machinery, often used as a basis for allocating manufacturing overhead to products.

Overhead Cost

The indirect costs that are not directly tied to production or sales, such as rent, utilities, and office expenses.

Activity-Based Costing

A costing methodology that assigns overhead costs to products based on their consumption of activities.