Pepsi Corporation's Current Ratio Is 0

question 12

Multiple Choice

Pepsi Corporation's current ratio is 0.5, while Coke Company's current ratio is 1.5. Both firms want to "window dress" their coming end-of-year financial statements. As part of their window dressing strategy, each firm will double its current liabilities by adding short-term debt and placing the funds obtained in the cash account. Which of the statements below best describes the actual results of these transactions?

• A) The transactions will have no effect on the current ratios.
• B) The current ratios of both firms will be increased.
• C) The current ratios of both firms will be decreased.
• D) Only Pepsi Corporation's current ratio will be increased.
• E) Only Coke Company's current ratio will be increased.

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Definitions:

Frustration-Aggression Hypothesis

Originally the idea that aggression is always preceded by frustration and that frustration inevitably leads to aggression. Revised to suggest that frustration produces an emotional readiness to aggress.

Emotional Readiness

An individual's preparedness to experience, manage, and appropriately express emotions in a given situation or in response to specific challenges.

Frustration

A feeling of disappointment and dissatisfaction arising from the hindrance of achieving a goal.

Verbal Behavior

The aspect of communication involving the use of spoken or written language to convey messages and interact with others.