Which of the Following Statements Is Correct

question 33

Multiple Choice

Which of the following statements is correct?

• A) In the text,depreciation is regarded as a use of cash because it reduces fixed assets,which then must be replaced.
• B) If a company uses some of its cash to pay off short-term debt,then its current ratio will always decline,given the way the ratio is calculated,other things held constant.
• C) During a recession,it is reasonable to think that most companies' inventory turnover ratios will change while their fixed asset turnover ratios will remain fairly constant.
• D) During a recession,we can be confident that most companies' DSOs (or ACPs)will decline because their sales will probably decline.
• E) Each of the above statements is false.

---

Definitions:

Money Supply

The comprehensive sum of all money available in an economy, counting cash, coins, and figures in checking and savings accounts, at a precise time.

Federal Reserve

The central bank of the United States, responsible for setting monetary policy, regulating banks, and ensuring the stability of the financial system.

Money Supply

The total amount of monetary assets available in an economy at a specific time, including cash and bank deposits.

Total Reserves

The sum of a bank's deposits held at the central bank and the cash physically held in the bank's vault.