How Can a Company Improve Its Current Ratio

question 141

Multiple Choice

How can a company improve its current ratio?

• A) Work with a creditor to reclassify some current debt into long-term debt
• B) Use cash to reduce current liabilities
• C) Nothing can ethically be done to improve the current ratio
• D) Use excess cash to buy new equipment

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Definitions:

Prospect Theory

A behavioral economic theory that describes how people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are unknown.

Behavioral Economists

Scholars examining how psychological, cognitive, emotional, cultural, and social influences affect the financial choices of individuals and organizations.

Gains

Increases in economic benefits, such as profits, revenue, or utility.

Losses

Negative financial results from business operations, where expenses exceed revenues.