Pepsi Corporation's Current Ratio Is 0

question 12

Multiple Choice

Pepsi Corporation's current ratio is 0.5, while Coke Company's current ratio is 1.5. Both firms want to "window dress" their coming end-of-year financial statements. As part of their window dressing strategy, each firm will double its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Which of the statements below best describes the actual results of these transactions?

• A) The transactions will have no effect on the current ratios.
• B) The current ratios of both firms will be increased.
• C) The current ratios of both firms will be decreased.
• D) Only Pepsi Corporation's current ratio will be increased.
• E) Only Coke Company's current ratio will be increased.

Prepare and interpret a balance sheet segment related to receivables.

Identify and explain differences between IFRS and GAAP in accounting for cash and receivables.

Record transactions under various methods (gross price, net price, allowance).

Understand and explain the concepts of gross price and net price methods of recording credit sales, including their impact on financial statements.

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Definitions:

Institutional Advertisement

Promotional activities aimed at building a company's image and establishing long-term brand awareness rather than promoting a specific product.

Science-Oriented

A focus or approach that prioritizes scientific methods and principles, often in research, development, or educational contexts.

Reminder-Oriented Advertising

is a marketing strategy designed to keep a brand or product in the mind of the consumer, even if they are already familiar with it.

Persuasive Advertising

A form of advertising aimed at convincing or encouraging consumers to take a particular action, such as buying a product or service.