The Following Selected Data Come from Celebration Company's Balance Sheets

question 25

Multiple Choice

 The following selected data come from Celebration Company's balance sheets over three recent years. Based on the data, what is Celebration's current ratio for each of the three years, and do the ratios show deterioration or improvement in Celebration's liquidity?

• A) 2.12; 2.17; 2.22; strong but deteriorating slightly
• B) 0.39; 0.40; 0.41; weak but improving slightly
• C) 2.56; 2.53; 2.46; strong and improving slightly
• D) 0.47; 0.45; 0.43; weak and deteriorating slightly

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Definitions:

Cost Ratio

A measure that compares a company's operating expenses to its revenue, indicating how efficiently it is managed by showing the percentage of sales that goes towards covering costs.

Beginning Inventory

The value of a company's stock of goods at the start of an accounting period, serving as a baseline for inventory management.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from its total revenue.

Period End Assets

The total value of all assets owned by a company at the end of a given financial reporting period.