Which of the Following Statements Is Correct

question 76

Multiple Choice

Which of the following statements is correct?

• A)The cash ratio measures a firm's ability to pay long-term debt with its available cash and marketable securities.
• B)Holding extremely high levels of liquidity to guard against liquidity crises is an inappropriate goal for the firm.
• C)The quick (or acid-test) ratio measures a firm's ability to pay off short-term obligations with long-term debt.
• D)The current ratio is a more stringent measure of liquidity than the quick (or acid-test) ratio.

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Definitions:

Materials Inventory

The raw materials, work-in-process, and finished goods that a company holds for the purpose of production.

Direct Materials Cost

The cost of raw materials that can be directly attributed to the production of goods.

Factory Machinery

Heavy equipment and tools used in a manufacturing or production environment to produce goods.

Factory Overhead Cost

Expenses related to the operation of a manufacturing facility that are not directly tied to a specific product, including utilities, depreciation, and maintenance.