If a Company Has a Current Ratio of 0

question 45

Multiple Choice

If a company has a current ratio of 0.82, which of the following statements would be true?

• A)The company is a serious credit risk and should not be lent money.
• B)The company's current ratio is below the industry average.
• C)The company's working capital cannot be calculated.
• D)The company's working capital is negative.

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Definitions:

Marginal Utility

The additional joy or advantage obtained from using one more unit of a good or service.

Diminishing

A principle that refers to a decrease or reduction in the effectiveness, value, or quantity of something over time or under certain conditions.

Additional Unit

An incremental quantity of a product or service, typically considered in the context of production or consumption.

Substitution Effect

The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods.