Last Year, a Firm Had a Current Ratio of 2

question 113

Multiple Choice

Last year, a firm had a current ratio of 2.0 and an acid-test ratio of 1.0. This year the firm's current ratio is 2.5 and its acid-test ratio is 1.5. This firm's ______ has ______.

• A) liquidity; improved
• B) liquidity; deteriorated
• C) profitability; improved
• D) profitability; deteriorated

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Definitions:

Called Bonds

Bonds that an issuer redeems before their maturity date at a specified call price.

Callable Bonds

Bonds that can be redeemed (called) by the issuer prior to their maturity date, typically at a premium above their par value.

Interest Payable

The amount of interest expense that has been incurred but not yet paid by a company, typically related to loans or credit.

Fiscal Year

A 12-month period used for accounting purposes and preparing financial statements, which may or may not align with the calendar year.