A Weakness of the Current Ratio Is

question 161

Multiple Choice

A weakness of the current ratio is

• A) the difficulty of the calculation.
• B) that it doesn't take into account the composition of the current assets.
• C) that it is rarely used by sophisticated analysts.
• D) that it can be expressed as a percentage as a rate or as a proportion.

Comprehend the accounting treatment and disclosure requirements for stock repurchases and conversions.

Understand the accounting and reporting requirements for stock-based compensation under current GAAP.

Understand the calculation of weighted average number of shares for basic earnings per share.

Know the compromise and choices offered to companies by SFAS No. 123 regarding stock options.

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Definitions:

Probability Density Function

A function that describes the relative likelihood for a continuous random variable to take on a given value.

Smooth Curve

A continuous, gently bending line without sharp angles or disruptions, often used in graphing data or in mathematical functions.

Total Area

The sum of all the specific areas within a boundary, often referring to the total surface area covered by a two-dimensional shape or land parcel.

Poisson Distribution

A probability distribution that measures the probability of a given number of events happening in a fixed interval of time or space.