Which of the Following Statements About the Current Ratio Is

question 393

Multiple Choice

Which of the following statements about the current ratio is accurate?

• A) Use of book values in calculation of this ratio is unacceptable because the market values of these assets and liabilities tend to deviate from book values.
• B) This ratio is calculated by dividing current liabilities by current assets.
• C) It will always be greater than the quick ratio in companies that carry inventory.
• D) This ratio is intended to indicate the long run liquidity position of the firm.
• E) The higher the current ratio, the higher the level of cash in a firm.

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Definitions:

Double Effect

When an action (such as administering opiates) has both a positive effect (relieving a terminally ill person’s pain) and a negative effect (hastening death by suppressing respiration).

Slow Respiration

A decreased rate of breathing, which can be a sign of good health under certain conditions, such as during sleep or relaxation.

Palliative Care

A specialized area of healthcare focused on providing relief from the symptoms, pain, and stress of a serious illness, aimed at improving quality of life.

Terminally Ill

Refers to a person suffering from a disease or condition that is incurable and expected to lead to death.