Which of the Following Statements Does Not Properly Describe the Current

question 61

Multiple Choice

Which of the following statements does not properly describe the current ratio?

• A)It measures the ability of a firm to pay its debts in the short-run.
• B)It is current assets divided by current liabilities.
• C)It is a measure of a firm's short-run liquidity.
• D)It measures a firm's ability to pay its long-term debts as they mature.

---

Definitions:

Dividend Growth Model

A valuation method used to predict the price of a company's stock by using projected dividends and discounting them back to present value.

Retained Earnings

The portion of a company's profits that is retained or re-invested in the business instead of being paid out as dividends to shareholders.

Marginal Cost Of Capital

The cost of obtaining an additional dollar of new capital, which can influence investment and financing decisions.

Investment Opportunity Schedule

A curve depicting the relationship between the required rate of return on investments and the total amount of investment, illustrating how much investment can be undertaken for a given return.