If a Company Has a Liquid Ratio of 0

question 106

Multiple Choice

If a company has a liquid ratio of 0.9,in order to improve its liquid ratio it might:

• A) increase its current assets by increasing its inventory.
• B) use more short-term debt to decrease current liabilities.
• C) increase its large amounts of accounts receivable to improve its cash position.
• D) increase its large amount of accounts to pay to decrease its current liabilities.

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Definitions:

Material

Substances or components that are used in the production or manufacturing of goods.

Underapplied Overhead

Happens when the overhead costs assigned to manufacturing are lower than the overhead expenses that were actually incurred.

Actual Overhead

Actual overhead refers to the direct costs actually incurred by a business for operations, including utilities, rent, and maintenance expenses.

Overhead Applied

The portion of overhead costs allocated to individual products or services based on an estimated or predetermined rate.