For Several Years, Flame Corporation Has Had a Current Ratio

question 84

Multiple Choice

For several years, Flame Corporation has had a current ratio that was consistent with other companies in its industry.For the most recent year, Flame's current ratio was significantly higher than that for the industry.What is the best possible explanation for this situation?

• A)The other companies in the industry were not as profitable.
• B)Flame's liquidity has improved or is not leveraging financial resources effectively.
• C)Flame has less property, plant and equipment than other companies.
• D)Flame has too much debt.

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Definitions:

Recognized Gross Profit

Gross profit that has been realized and reported in the financial statements of a company, calculated as sales revenue minus the cost of goods sold.

Periodic Cash Proceeds

Periodic cash proceeds refer to the regular amounts of money received by a business over a specified period, such as from sales or investments.

Market Price Method

A valuation method for inventory or assets based on current market prices.

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.