If a Company Has a Current Ratio of 1

question 207

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?

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Definitions:

Productivity Growth

An increase in the efficiency of producing goods and services, typically leading to economic growth.

Resource Cost

The total cost of all inputs used in the production of goods or services, including raw materials, labor, and capital. It reflects the expenditure needed to create and bring a product or service to the market.

Trade

The exchange of goods and services between individuals or entities, typically referring to international trade involving the movement of products across borders.

Specialization and Trade

An economic concept where individuals or entities focus on the production of specific goods or services to trade for other goods or services, enhancing efficiency and productivity.