Which of the Following Statements Is Most Correct

question 50

Multiple Choice

Which of the following statements is most correct?

• A) If a company increases its current liabilities by $1,000 and simultaneously increases its inventories by $1,000, its current ratio must rise.
• B) If a company increases its current liabilities by $1,000 and simultaneously increases its inventories by $1,000, its quick ratio must fall.
• C) A company's quick ratio may never exceed its current ratio.
• D) Answers b and c are correct.
• E) None of the answers above is correct.

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Definitions:

Investment

The allocation of resources, usually financial, into assets with the expectation of generating income or profit in the future.

Saving Rate

The proportion of disposable income that is saved by individuals or households over a period, rather than being spent.

Interest Rates

Rates at which interest is charged or paid for the use of money, typically expressed as an annual percentage rate.

Gross Investment

The total amount of money spent on new capital assets before accounting for depreciation.