Which of the Following Statements Is CORRECT

question 53

Multiple Choice

Which of the following statements is CORRECT?

• A) A reduction in inventories held would have no effect on the current ratio.
• B) An increase in inventories would have no effect on the current
• Ratio.
• C) If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover
• Ratio will increase.
• D) A reduction in the inventory turnover ratio will generally lead to
• An increase in the ROE.
• E) If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover ratio will decrease.

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Definitions:

Short-Run Exposure

Financial risk faced by companies in the immediate future due to exchange rate movements, affecting the value of foreign currency denominated transactions.

Exchange Rate Risk

The possibility that investors may face financial losses as a result of changes in foreign exchange rates.

Fluctuations

Variations or changes in level, degree, or value over time, often seen in financial markets and economic indicators.

Unanticipated Changes

Sudden and unexpected events or changes that can significantly impact the economy, markets, or specific sectors without prior warning.