Hard-Up Ltd Has a Current Ratio of 0

question 48

Multiple Choice

Hard-up Ltd has a current ratio of 0.75.Its current liabilities amount to $200 000.It borrows $75 000 from a finance company,repayable in five years.
-What is the effect of the loan on the debt-to-equity ratio?

• A) There is an increase.
• B) There is a decrease.
• C) There is no effect.
• D) It cannot be determined from the information provided.

---

Definitions:

Quantity Controls

Government-imposed limits on the amount of a good that can be produced or sold within a market.

Price Ceilings

A legally established maximum price for goods or services, aimed at preventing prices from rising too high.

Price Floors

Minimum legal prices set by the government for certain goods and services, intended to ensure that prices do not fall below a certain level.

Institutional Program

A comprehensive initiative conducted by an organization, covering aspects like training, development, or welfare, ingrained within its structure.