The Most Important Information Needed to Determine If Companies Can

question 125

Multiple Choice

The most important information needed to determine if companies can pay their current obligations is the

• A)profit for this year.
• B)projected profit for next year.
• C)relationship between current assets and current liabilities.
• D)relationship between current and non-current liabilities.

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Definitions:

Implicit Interest

The interest rate that is not explicitly stated but inferred from the difference between the purchase price and the total payments to be made in a financing transaction.

Zero-Coupon Bond

A type of bond that does not pay periodic interest and is sold at a discount from its face value, with the full face value being paid at maturity.

Implicit Interest

The interest represented by the difference between the cash price of a product and the amount financed over time, not directly stated as an interest rate.

Face Value

The nominal or dollar value of a security stated by the issuer, which is the amount paid back to the holder at maturity.