Liquidity Problems Are Likely to Exist for a Company When

question 175

Multiple Choice

Liquidity problems are likely to exist for a company when its acid-test ratio:

• A) Is both less than the industry average and lower than 1 to 1.
• B) Is higher than 1 to 1.
• C) Is less than the industry average.
• D) Is 1 to 1.
• E) Is lower than 1 to 1.

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Definitions:

Dividend Increases

The action of a company raising the amount of dividend payments to its shareholders.

Compromise Policy

A strategy of finding a middle ground between two conflicting positions to resolve a dispute or achieve a mutually acceptable outcome.

Financial Stability

A state in which the financial system, encompassing institutions, markets, and the overall economy, is capable of withstanding shocks without significant disruption.

Low-Dividend Policy

A financial strategy where a company decides to distribute a relatively small portion of its earnings to shareholders in the form of dividends.