Last Year Thatcher Industries Had a Current Ratio of 1

question 38

Multiple Choice

Last year Thatcher Industries had a current ratio of 1.2, a quick ratio of 0.8, and current liabilities of $500,000. Which of the following statements is most correct?

• A) If the company obtained a short-term bank loan for $500,000 and used the proceeds to purchase inventory, its current ratio would fall.
• B) Last year Thatcher industries had $200,000 in inventories.
• C) Last year Thatcher industries had $416,667 in current assets.
• D) All of the answers above are correct.
• E) Answers a and b are correct.

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Definitions:

M2

A classification of money supply that includes cash, checking deposits, and easily convertible near money like savings deposits, money market securities, and mutual funds.

Money Supply

The total financial assets existing in an economy at a specific period, incorporating cash, coins, and the balances maintained in checking and savings accounts.

Banking System

The structure of banks and financial institutions within an economy, which provides financial services including deposits, loans, and currency exchange.

M2

A measure of the money supply that includes cash, checking deposits, and easily convertible near money.