Which of the Following Statements Is CORRECT

question 27

Multiple Choice

Which of the following statements is CORRECT?

• A)If a firm has high current and quick ratios, this always indicate that the firm is managing its liquidity position well.
• B)If a firm sold some inventory for cash and left the funds in its bank account, its current ratio would probably not change much, but its quick ratio would decline.
• C)If a firm sold some inventory on credit, its current ratio would probably not change much, but its quick ratio would decline.
• D)If a firm sold some inventory on credit as opposed to cash, there is no reason to think that either its current or quick ratio would change.
• E)The inventory turnover ratio and days sales outstanding (DSO) are two ratios that are used to assess how effectively a firm is managing its current assets.

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Definitions:

Dividend Yield

A benchmark in finance that compares the annual dividend output of a company with its stock price.

Annual Dividend

The total amount of dividends a company pays to its shareholders in a given fiscal year.

Current Stock Price

The latest trading price of a company's shares on the stock market.

Common Stock

A type of equity security that represents ownership in a corporation, entitling the owner to vote at shareholder meetings and receive dividends.