Peak Performance Sporting Goods Company Has Just Applied for a Bank

question 22

Multiple Choice

Peak Performance Sporting Goods Company has just applied for a bank loan in order to expand the business. Using the most recent balance sheet data provided by the company owner, you calculate that the company's current ratio is 2.5. In your presentation to the company boss, you remark

• A) Peak Performance is currently having trouble meeting its short-term obligations.
• B) Peak Performance has $2.50 that it owes each month, for every $1.00 of cash that it is generating.
• C) Peak Performance has $2.50 of current assets for each $1.00 of current liabilities.
• D) Due to the fact that most of Peak Performance's current assets are tied up in inventory, there is no need to worry about whether Peak Performance will be able to make loan payments.

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Definitions:

Information Power

The influence and control one gains from possessing valuable data or knowledge.

Referent Power

A form of influence based on the leader's personal attributes, where followers identify with and want to emulate the leader.

Affection

pertains to feelings of fondness or tenderness directed towards someone or something, influencing interpersonal relationships and behaviors.

Loyalty

A strong feeling of support or allegiance towards someone or something.