A Current Ratio of 2

question 167

Multiple Choice

A current ratio of 2.5 means that for every dollar of:

• A)accounts payable,there is $2.50 of cash.
• B)current liabilities,there is $2.50 of current assets.
• C)current assets,there is $2.50 of current liabilities.
• D)total liabilities,there is $2.50 of cash.

---

Definitions:

Allocation of Limited Resources

The process of distributing scarce resources among various projects or business units.

Incremental Costs

The additional costs incurred when producing an additional unit of a product or service.

Fixed Manufacturing Costs

Costs that do not change with the level of production, such as rent, salaries, and insurance, which are incurred regardless of output volume.

Full Capacity

The maximum level of output that a company can sustain to make a product or provide a service.