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The Current Ratio Is Irrelevant in Liquidity Analysis for Service

question 5

True/False

The current ratio is irrelevant in liquidity analysis for service companies because they do not have inventories among their current assets.


Definitions:

Normative

Relating to principles or rules of what is considered right and wrong, often used in economics to express subjective or value-based judgments.

Other Things Equal

A principle in economic models known as ceteris paribus, which means holding all other variables constant to isolate the effect of one variable.

Variables

Elements, factors, or quantities that can change or have different values in a given situation or analysis.

Economic Decisions

The choices made by individuals, households, or organizations regarding the allocation of resources and the distribution of goods and services.

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