Which of the Following Statements Is CORRECT

question 27

Multiple Choice

Which of the following statements is CORRECT?

• A)If a firm has high current and quick ratios, this always indicate that the firm is managing its liquidity position well.
• B)If a firm sold some inventory for cash and left the funds in its bank account, its current ratio would probably not change much, but its quick ratio would decline.
• C)If a firm sold some inventory on credit, its current ratio would probably not change much, but its quick ratio would decline.
• D)If a firm sold some inventory on credit as opposed to cash, there is no reason to think that either its current or quick ratio would change.
• E)The inventory turnover ratio and days sales outstanding (DSO) are two ratios that are used to assess how effectively a firm is managing its current assets.

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Definitions:

Peg-Word Method

A mnemonic technique that involves linking words to numbers or items to easily remember them.

Anchor Phrases

Keywords or terms heavily emphasized or repeated in a text, speech, or conversation that guide understanding or retention of the information presented.

Chunking

The formation of individual units of information into larger units. This is often used as a means of overcoming short-term memory limitations.

Conceptually Similar

Pertains to ideas or concepts that have a likeness or resemblance in nature or character.