A Current Ratio Greater Than 1 Can Tell Us That

question 7

Multiple Choice

A current ratio greater than 1 can tell us that the company ________.

• A)should be able to cover the current liabilities
• B)should be able to keep away from short-term cash problems
• C)may have too much capital tied up in current assets
• D)All of these

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Definitions:

Net Income

The overall income a company retains following the subtraction of all costs and tax obligations from its earnings.

Net Cash Inflows

The total amount of cash received minus the total amount of cash outflows over a specified period.

Operating Income

Operating income is the profit earned from a firm's normal business operations, excluding non-operating income and expenses like interest and taxes.

Cash Payback Period

The duration it takes for an investment to generate cash flows sufficient to recover the initial investment cost, often used in capital budgeting to assess investment attractiveness.