The Current Ratio Fails to Accurately Reflect

question 58

Multiple Choice

The current ratio fails to accurately reflect

• A)the ability of a company to pay its current debts as they come due.
• B)amounts that will come due within the next accounting period.
• C)amounts due within the next operating cycle as of the end of the accounting period.
• D)cash flows anticipated in future accounting periods.

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Definitions:

Benefit

An advantage or profit gained from something, including direct financial gains or more intangible positive outcomes.

Intrusion

An act of entering into a place or situation where one is unwelcome or not authorized.

Externality

A consequence of an industrial or commercial activity that affects other parties without this being reflected in market prices.

Uncompensated Impact

Uncompensated impact refers to effects borne by parties who are not directly involved in a transaction or activity and are not compensated for their losses.