Assume That a Company Has an Operating Cash Flow Ratio

question 109

Multiple Choice

Assume that a company has an operating cash flow ratio of 0.75. Payment of accrued wages payable would cause the operating cash flow ratio to

• A)decrease.
• B)increase.
• C)be unchanged since the effects offset one another.
• D)be unchanged since it has no impact on any current liability or operating cash flow accounts.

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Definitions:

Procedures

Established methods or protocols followed by an organization to carry out tasks or activities.

Limited Liability

A legal structure that limits shareholders' or owners' personal responsibility for a company's debts and liabilities to their investment in the company.

Creditors

Individuals or institutions to whom money is owed by a person or organization.

Stockholders

Individuals or entities that own one or more shares of stock in a corporation, thus having a residual claim on the corporation's assets after liabilities have been paid.