Ace Company Is a Retail Store

question 79

Multiple Choice

Ace Company is a retail store.Due to competition, it is having trouble selling its products.Thus, inventory has been building up.Ace's current ratio has not changed for the past three years, in spite of the inventory buildup.Which of the following statements is true?

• A)As long as the current ratio remains constant, there is no need for concern.
• B)The composition of current assets and current liabilities does not matter.
• C)The management of Ace should consider the effect of slow moving inventory on its liquidity.
• D)Since inventory is a current asset, any increases should automatically cause the current ratio to rise.

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Definitions:

Organizational Approach

A method or strategy employed by an organization to achieve its goals, often involving structure, management, and processes.

Emotionally Charged

Describes language, imagery, or situations that evoke strong emotional responses from the audience or participants.

Range of Information

The spectrum or variety of data and facts available on a particular subject or for a specific purpose.

Scope

The extent or range of view, outlook, application, operation, or effectiveness of an action, concept, or project.