A Firm Has a Current Ratio of 1

question 42

Multiple Choice

A firm has a current ratio of 1.4 and a quick ratio of 0.9.Given this,you know for certain that the firm:

• A)pays cash for its inventory.
• B)has more than half its current assets invested in inventory.
• C)has more cash than inventory.
• D)has more current liabilities than it does current assets.
• E)has positive net working capital.

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Definitions:

Bankruptcy Act

Legislation governing the process through which individuals or entities unable to meet their financial obligations can seek relief from some or all of their debts.

List of Creditors

A documented record of all individuals or entities to whom a debtor owes money, often compiled in bankruptcy proceedings.

Insiders

Individuals within or connected to an organization who possess confidential information, especially pertaining to stock trading.

Voidable Transfer

A transaction that can be declared invalid by one of the parties involved due to reasons such as fraud or undue influence.