If a Company Has a Current Ratio of 1

question 54

Short Answer

If a company has a current ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio? $\begin{array}{lc}&\text { Short-term Borrowing } & \text { Collection of Receivables } \\\hline a.& \text { Increase } & \text { No effect } \\b.&\text { Increase } & \text { Increase } \\c.&\text { Decrease } & \text { No effect } \\d.&\text { Decrease } & \text { Decrease }\end{array}$

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Definitions:

Market System

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.

Entrepreneurs

Individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly.

Production Techniques

Production Techniques encompass the methods and processes used in the creation of goods and services, including labor, technology, and machinery.

Maximum Revenues

The highest possible income a company can generate from the sale of its products or services, achieved at the optimal price point and quantity sold.