Which One of the Following Would Be Most Detrimental to a Firm's

question 60

Multiple Choice

Which one of the following would be most detrimental to a firm's current ratio if that ratio is currently 2?

• A) Collecting payment on an accounts receivable
• B) Selling marketable securities at cost
• C) Paying off accounts payable with cash
• D) Purchasing inventory on credit

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Definitions:

Equity Method

An accounting approach used to reflect the value of an investment in another company, where the investment's value is adjusted based on the investor's share of the investee's profits or losses.

Par Value

The face value of a bond or stock as stated by the issuing company, which does not necessarily reflect its market value.

Fair Value

An estimated market value of an asset or liability, derived from current prices in an active market.

Amortization

The act of gently reducing the initial value of an intangible asset over the time it benefits the entity.