One Common Problem with the Current Ratio Is That It

question 80

Multiple Choice

One common problem with the current ratio is that it is susceptible to "window dressing." If prior to the end of the accounting period Saxon Company has a current ratio of 1.5 and management wishes to boost its current ratio it may decide to:

• A) pay off accounts payable prior to year-end.
• B) purchase more inventory on account.
• C) purchase short-term investments with cash.
• D) purchase more inventory with cash.

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Random Sampling

A statistical sampling technique in which each member of the population has an equal chance of being included, ensuring the sample's representativeness of the whole.