As a Short-Term Creditor Concerned with a Company's Ability to Meet

question 58

Multiple Choice

As a short-term creditor concerned with a company's ability to meet its financial obligation to you, which one of the following combinations of ratios would you most likely prefer?

• A) 0.5 0.5 0.33
• B) 1.0 1.0 0.50
• C) 1.5 1.5 0.50
• D) 2.0 1.0 0.67
• E) 2.5 0.5 0.71

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Definitions:

Bank Service Charge

Fees charged by a bank to its customers for account-related services.

Cash Receipts

The total amount of money, including cash, checks, and credit card payments, received by a business during a given period.

Internal Control Procedures

Processes implemented by a company to ensure integrity of financial and accounting information, promote accountability, and prevent fraud.

GAAP

GAAP stands for Generally Accepted Accounting Principles, which are standardized guidelines and practices for financial accounting and reporting in the U.S.