If Management Decided to Create a Hidden Reserve to Make

question 97

Multiple Choice

If management decided to create a hidden reserve to make the company look more profitable by increasing the allowance for uncollectibles, what would be the effect on the current ratio and quick ratio?
$\begin{array}{ll}&\text { Current } & \text { Quick } \\&\text { Ratio } & \text { Ratio } \\A.&\text { Increase } & \text { Increase } \\B.&\text { Increase } & \text { Decrease } \\C.&\text { Decrease } & \text { Increase } \\D.&\text { Decrease } & \text { Decrease }\end{array}$

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of maximizing a company's future profits.

Straight-Line Depreciation

An approach to evenly spread an asset's purchase price over the span of its useful life.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the strategic objectives of an organization, such as acquiring new machinery or expanding operations.

Incremental Sales

Additional sales generated by a specific business activity or decision, such as a marketing campaign or product launch.