Safeco's Current Assets Total to $20 Million Versus $10 Million

question 28

Multiple Choice

Safeco's current assets total to $20 million versus $10 million of current liabilities,while Risco's current assets are $10 million versus $20 million of current liabilities.Both firms would like to "window dress" their end-of-year financial statements,and to do so they tentatively plan to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts.Which of the statements below best describes the results of these transactions?

• A)The transactions would improve Safeco's financial strength as measured by its current ratio but lower Risco's current ratio.
• B)The transactions would lower Safeco's financial strength as measured by its current ratio but raise Risco's current ratio.
• C)The transactions would have no effect on the firm' financial strength as measured by their current ratios.
• D)The transactions would lower both firm' financial strength as measured by their current ratios.
• E)The transactions would improve both firms' financial strength as measured by their current ratios.

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Definitions:

Listening Patterns

The habitual ways in which individuals process and respond to auditory information, reflecting their preferences and tendencies in communication.

Affective Constructions

Constructs relating to or involving emotions and feelings.

Anger-Sadness-Shame

Emotional states commonly explored in therapy, often related to personal conflicts, loss, or self-perception issues.

Depression-Anxiety-Guilt

An interrelated trio of emotional states where one feels persistent sadness, worry, and remorse, often impacting daily functioning.