Which of the Following Statements About the Current Ratio Is

question 147

Multiple Choice

Which of the following statements about the current ratio is accurate?

• A) Use of book values in calculation of this ratio is unacceptable because the market values of these assets and liabilities tend to deviate from book values.
• B) This ratio is calculated by dividing current liabilities by current assets.
• C) It will always be greater than the quick ratio in companies that carry inventory.
• D) This ratio is intended to indicate the long run liquidity position of the firm.
• E) The higher the current ratio, the higher the level of cash in a firm.

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Definitions:

Decreased

Decreased means to lessen in size, amount, severity, or intensity.

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An informal term referring to groups outside the three branches of the US government that influence decision-making, such as the media or interest groups.

Government

The organization, or system of organizations, through which a political unit exercises authority and performs functions.