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:

Jurisdictions

The official power to make legal decisions and judgments, often within a specific geographic area or over a certain type of case.

Marketable Title

A title to real property that is free from significant defects, encumbrances, or liens, and can be easily sold or mortgaged.

Warranty

A guarantee, typically from a manufacturer or seller, that a product will meet certain standards of quality and reliability or that specific repair or replacement actions will be taken if it does not.

Condemned

Property that has been officially taken by a government for public use, or deemed unsafe or unfit for use, often through the process of eminent domain or as a result of health and safety inspections.