If Reebok Wanted to Know How Quickly It Could Convert

question 73

Multiple Choice

If Reebok wanted to know how quickly it could convert its assets to cash in order to pay off short-term debts, which ratio would it use?

• A) current assets ÷ current liabilities
• B) total liabilities ÷ total owner's equity
• C) net revenue after taxes ÷ revenue
• D) sales ÷ total assets

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Definitions:

Net Income

is the total earnings of a company after all expenses and taxes have been subtracted from total revenue; a key indicator of financial health.

Accrual Accounting

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.

Current Operating Liabilities

Short-term liabilities that are incurred as part of the normal operations of a business, due within a fiscal year.

Decreases

A reduction in quantity, size, or overall value of an asset, revenue, or other financial metric.