A Firm's Current Ratio Is Above the Industry Average

question 18

Multiple Choice

A firm's current ratio is above the industry average. However, the firm's quick ratio is below the industry average. These ratios suggest that the firm

• A) has relatively more total current assets and even more inventory than other firms in the industry.
• B) is very efficient at managing inventories.
• C) has liquidity that is superior to the average firm in the industry.
• D) is near technical insolvency.

---

Definitions:

Nominal GDP

The market value of all finished goods and services produced within a country's borders in a specific time period, measured in current prices without adjusting for inflation.

M1 Velocity of Money

The rate at which money circulates in the economy, measured as the ratio of nominal GDP to the money supply (M1), indicating how often a unit of currency is used to purchase domestically-produced goods and services within a given time period.

Financial Innovation

The creation or improvement of financial products, services, technologies, or processes that provide new ways to invest, borrow, lend, and save.

Monetary Policy

The process by which a country's central bank controls the supply of money and interest rates to influence the economy's growth and stability.