The Current Ratio Is a Good Proxy for a Firm's

question 86

Multiple Choice

The current ratio is a good proxy for a firm's:

• A) liquidity.
• B) efficiency.
• C) degree of leverage.
• D) profitability.

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Definitions:

Cash Discount

A reduction in the invoice amount by a seller if payment is made within a specified period.

Effective Annual Cost

The total cost of a loan or investment, expressed as an annual rate, including interest and any fees or additional costs.

Credit Terms

Refers to the conditions, including payment timelines and interest rates, under which credit is extended to borrowers.

Receivables Period

The average time that it takes for a business to receive payments owed by its customers for goods or services rendered.