If a Firm's Quick Ratio Is Equal to Its Current

question 79

Multiple Choice

If a firm's quick ratio is equal to its current ratio:

• A) It has a low level of current liabilities.
• B) It has no inventory.
• C) It faces a potentially serious liquidity crisis.
• D) It is in a loss-making position.

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set.

Component Cost

The expense associated with acquiring or manufacturing each individual part of a product or service.

Flotation Cost

The total costs associated with issuing new securities, including underwriting fees and other expenses.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, typically with dividends that are paid out before those of common stocks.