A Firm's Efficient Use of Its Assets in Running the Business

question 300

Multiple Choice

A firm's efficient use of its assets in running the business is key to maintaining sufficient cash flow. Ratios that accountants utilize to measure the efficient use of assets are called ________ ratios.

• A) leverage
• B) liquidity
• C) activity
• D) profitability

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Definitions:

Payable to Cash

A term indicating that a financial instrument, like a check, is written in such a manner that it can be cashed or negotiated by any holder, not just a specific payee.

"Pay to the Order of Bearer"

A phrase used on checks or other negotiable instruments that indicates the person possessing the document has the right to cash or negotiate it.

Drawee

The party, typically a bank, required to pay the specified amount on a check or draft when it is presented for payment.

Negotiable Instrument

A written document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payer named on the document.