All of the Following Regarding the Current Ratio Are True

question 64

Multiple Choice

All of the following regarding the current ratio are true except:

• A)Current ratio is calculated by dividing current assets by current liabilities.
• B)Current ratio helps to assess a company's ability to pay its debts in the near future.
• C)Current ratio does not affect a creditor's decision on whether to allow a company to buy on credit.
• D)Current ratio can affect a creditor's decision about whether to lend money to a company.
• E)Current ratio can reveal challenges in covering short-term obligations if it is less than 1.

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Definitions:

Practitioner

An individual involved professionally in the practice of a particular occupation, often in the healthcare and medicinal fields.

Initial Letter

The first letter of a word, sentence, or paragraph, which can sometimes be capitalized or stylized for emphasis or decorative purposes.

Days Past Due

The number of days that have elapsed since a payment was due, often used in financial contexts to indicate overdue payments.

Inquiry

The act of seeking information by questioning or investigation.