If a Firm Has a High Current Ratio but a Low

question 45

Multiple Choice

If a firm has a high current ratio but a low acid-test ratio,one can conclude that:

• A) the firm has a large outstanding accounts receivable balance.
• B) the firm has a large investment in inventory.
• C) the firm has a large amount of current liabilities.
• D) the firm's financial leverage is very high.

Analyze the significance of footing and crossfooting in ensuring the accuracy of journal totals.

Prepare a schedule of accounts receivable and payable and understand its importance in financial reporting.

Discuss the concept and calculation of segment return on assets and its significance for profitability analysis.

Illustrate the adjustment and correction processes in the event of errors in the accounting records.

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Definitions:

Inventory Purchases

The act of buying products or goods to be sold or used in the production process by a company.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company.

Sales

The transactions involving the exchange of goods or services for money, representing the primary source of revenue for most businesses.

Total Disbursements

The total amount of money paid out by a business over a set period, including expenses, investment purchases, and debt repayments.