If a Company Has a Current Ratio of 2,which of the Following

question 39

Multiple Choice

If a company has a current ratio of 2,which of the following measures will increase the current ratio?

• A) Buying more inventory on short-term credit
• B) Buying more inventory with cash
• C) A customer paying an overdue account
• D) Paying off a short-term bank advance with long-term debt

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Definitions:

Coupon Payments

Periodic interest payments made to bondholders, usually on an annual or semi-annual basis, as compensation for investing in the bond.

Maturity Risk Premium

The additional return that investors demand for bearing the risk associated with holding a longer-term debt instrument.

Yield Curve

A graphical representation showing the relationship between the interest rates of bonds of identical quality but different maturity dates.

Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.