Which of the Following Statements Is Most Correct

question 24

Multiple Choice

Which of the following statements is most correct?

• A) If a company uses cash to buy inventory, its current ratio will decline.
• B) If a company uses some of its cash to pay off short-term debt, then its current ratio will always decline, given the way the ratio is calculated, other things held constant.
• C) During a recession, it is reasonable to think that most companies' inventory turnover ratios will change while their fixed asset turnover ratios will remain fairly constant.
• D) During a recession, we can be confident that most companies' DSOs (or ACPs) will decline because their sales will probably decline.
• E) Each of the statements above is false.

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