Joe and Megan Are Newly Married College Graduates

question 7

Multiple Choice

Joe and Megan are newly married college graduates. Both have jobs with bright futures. One strategy that they could use to accumulate capital for investment purposes, would be to

• A) borrow heavily to buy a house.
• B) use their credit cards to acquire assets while prices are relatively low.
• C) live on just one of their incomes and save the other.
• D) quit their jobs and return to school to earn graduate degrees.

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Definitions:

Quick Ratio

Quick Ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets.

Current Assets

Assets that will be used or turned into cash within one year.

Current Ratio

A financial metric that measures a company's ability to pay its short-term obligations with its short-term assets, calculated by dividing current assets by current liabilities.

Debt-to-Equity

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity, indicating the relative proportion of shareholder equity and debt used to finance the company's assets.