Which of the Following Statements Is Correct

question 38

Multiple Choice

Which of the following statements is correct?

• A) The cash ratio measures a firm's ability to pay long-term debt with its available cash and marketable securities.
• B) Holding high levels of liquidity to guard against liquidity crises is an inappropriate goal for the firm.
• C) The quick (or acid-test) ratio measures a firm's ability to pay off short-term obligations with long-term debt.
• D) The current ratio is a more stringent measure of liquidity than the quick (or acid-test) ratio.

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Definitions:

Deposit In Transit

Funds that have been deposited by a company but not yet credited to its bank account.

Ledger

A comprehensive collection of a company's financial accounts.

Petty Cash Fund

A small amount of cash kept on hand by a business for making immediate payments for miscellaneous small expenses.

Journal Entries

The basic means of recording financial transactions in the accounting records, consisting of debits and credits to various accounts.