Gator Corporation Currently Has a Current Ratio Equal to 0

question 10

Multiple Choice

Gator Corporation currently has a current ratio equal to 0.65.If Gator Corporation increases current assets and current liabilities by the same amount, what will happen to their current ratio?

• A)Increase
• B)Decrease
• C)Stay the same
• D)Change, but more information is required to determine the direction of the change.
• E)None of the above.

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Definitions:

Explicit Costs

Direct, out-of-pocket expenses incurred in the operation of a business or investment.

Cash Expenditures

Funds spent by a company or individual in cash form for operating activities, investments, and financing.

Explicit Costs

Direct, out-of-pocket payments made by firms for the use of inputs and resources in the production process.

Implicit Costs

Costs that represent the opportunity cost of using resources owned by the firm for its own production instead of earning income elsewhere.