Peak Performance Sporting Goods Company Has Just Applied for a Bank

question 307

Multiple Choice

Peak Performance Sporting Goods Company has just applied for a bank loan in order to expand the business.Using the most recent Balance Sheet data provided by the company owner,you calculate that the company's current ratio is 2.5.In your presentation to the company boss,you remark:

• A)Peak Performance is currently having trouble meeting its short-term obligations.
• B)Peak Performance has $2.50 that it owes each month,for every $1.00 of cash that it is generating.
• C)Peak Performance has $2.50 of current assets for each $1.00 of currently liabilities.
• D)Due to the fact that most of Peak Performance's current assets are tied-up in inventory,there is no need to worry about whether Peak Performance will be able to make loan payments.

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Definitions:

Security Measures

Procedures or actions taken to enhance the safety and protect the assets of individuals or businesses from various threats.

Safeguard Inventory

Strategies and measures implemented by a company to protect its inventory from damage, theft, and other losses.

FOB Shipping Point

A term used in shipping indicating that the buyer is responsible for goods once they are shipped, and must cover transport costs.

Net Income

Net income is the total earnings of a company after deducting all expenses, taxes, and losses, indicating the company's profitability over a specific period.