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

---

Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.

Cost of Retained Earnings

The opportunity cost for shareholders for having the company retain the earnings instead of distributing them, often considered in investment and dividend decisions.

Risk Free Rate

The theoretical rate of return of an investment with zero risk of financial loss, often represented by the yield on government bonds.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than one indicates higher than market volatility.