Which of the Following Statements Is CORRECT

question 34

Multiple Choice

Which of the following statements is CORRECT?

• A)A reduction in inventories held would have no effect on the current ratio.
• B)An increase in inventories would have no effect on the current ratio.
• C)If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.
• D)A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.
• E)If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover ratio will decrease.

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Definitions:

Declare And Distribute

The process by which a company announces and then allocates dividends to its shareholders.

Dividends

Payments made by a corporation to its shareholder members, derived from the company's profits.

Excess Solvency

refers to the situation where a company holds significantly more assets or financial reserves than the minimum required by regulators to cover its liabilities and potential claims.

Proxy

A form of authorization given by a shareholder or other party allowing another person to vote or act on their behalf, often used in corporate settings.