Selected Data from the Financial Statements Are Provided Below

question 97

Multiple Choice

Selected data from the financial statements are provided below:

-The following information was included in a note to the 2015 financial statements of Romeo Productions: The company has a loan agreement with First National Bank that states:
The company's ratios are: current ratio, 2.3; debt-to-equity ratio, 0.6; times interest earned ratio, 7.1; and inventory turnover ratio, 3.7. Based on this information, the company was in default of its loan agreement because of the

• A)current ratio.
• B)debt-to-equity ratio.
• C)times interest earned ratio.
• D)inventory turnover ratio.

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Definitions:

Bottleneck

A machine or some other part of a process that limits the total output of the entire system.

Outside Supplier

A third-party company or entity that provides goods or services to another company, often used in the context of manufacturing and supply chains.

Opportunity Cost

The cost associated with not choosing the next best alternative when making a decision, representing the benefits one could have received by taking an alternative action.

Alternative Use

The value or potential benefit that is foregone as a result of using an asset or resource in a particular way instead of another possible way.