Assume That a Company Has an Operating Cash Flow Ratio

question 109

Multiple Choice

Assume that a company has an operating cash flow ratio of 0.75. Payment of accrued wages payable would cause the operating cash flow ratio to

• A)decrease.
• B)increase.
• C)be unchanged since the effects offset one another.
• D)be unchanged since it has no impact on any current liability or operating cash flow accounts.

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Definitions:

Compounded Monthly

Pertains to the method of adding interest each month to both the initial principal and the previously accrued interest.

Annual Deposit

A fixed amount of money deposited into an account once every year.

RRSP

A Registered Retirement Savings Plan in Canada that allows for tax-deferred savings for retirement.

Compounded Quarterly

The method of calculating interest by adding it to the principal every three months, affecting the total amount of interest earned or paid.