Safeco's Current Assets Total to $20 Million Versus $10 Million

question 24

Multiple Choice

Safeco's current assets total to $20 million versus $10 million of current liabilities, while Risco's current assets are $10 million versus
$20 million of current liabilities. Both firms would like to "window dress" their end-of-year financial statements, and to do so they tentatively plan to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts. Which of the statements below best describes the results of these transactions?

• A) The transactions would raise Safeco's financial strength as
• Measured by its current ratio but lower Risco's current ratio.
• B) The transactions would lower Safeco's financial strength as
• Measured by its current ratio but raise Risco's current ratio.
• C) The transaction would have no effect on the firm' financial
• Strength as measured by their current ratios.
• D) The transaction would lower both firm' financial strength as
• Measured by their current ratios.
• E) The transaction would improve both firms' financial strength as measured by their current ratios.

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Definitions:

Sociologists

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Individuals who are the children of immigrants, typically born and raised in the host country of their parents.

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The physical abilities and traits that contribute to proficiency in sports and physical activities, including strength, agility, and stamina.