A Company Uses Current Ratio to Analyze Its Financial Position

question 56

Multiple Choice

A company uses current ratio to analyze its financial position. Which of the following information can be obtained from current ratio?

• A) efficiency of inventory management
• B) productivity of the company's assets
• C) information on the short-term solvency
• D) information on the total debt of the company
• E) information on financial leverage

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Definitions:

Units Produced

The total number of completed products that come out of a manufacturing process during a specific period.

Contribution Format Income Statement

An income statement layout that separates variable costs from fixed costs, showing the contribution margin and highlighting how sales revenue covers variable costs and fixed costs to determine net income.

Break-even Point

This refers to the level of production or sales volume at which total revenues match total expenses, resulting in no net profit or loss.

Net Operating Income

A financial metric indicating the profitability of a business's core operations, calculated by subtracting operating expenses from gross income.