A Company Has a Current Ratio of 2

question 142

Multiple Choice

A company has a current ratio of 2.0 and a quick ratio of 1.5.Assume the company then paid previously declared dividends in the amount of $20,000.Which of the following statements is true?

• A)The current ratio will decrease and the quick ratio will decrease.
• B)The current ratio will decrease and the quick ratio will not change.
• C)The current ratio and the quick ratio will not change.
• D)The current ratio will increase and the quick ratio will increase.

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Definitions:

Personal Taxes

Personal taxes refer to taxes levied on the income, property, or wealth of individuals, as opposed to taxes imposed on companies or other legal entities.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity and preferred equity, constituting how a firm finances its overall operations and growth.

Debt

The total amount of money owed by an individual, firm, or government to lenders, which can include loans, bonds, and other financial obligations.

Capital Structure

The mix of a company's long-term debt and equity that it uses to finance its operations and projects.