Creditors Often Compare a Firm's ________ and ________ to Assess

question 30

Multiple Choice

Creditors often compare a firm's ________ and ________ to assess whether the firm has sufficient working capital to meet its short-term needs.

• A) total assets; total liabilities
• B) current assets; current liabilities
• C) total assets; current liabilities
• D) current assets; total liabilities

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Definitions:

Interest Method

A technique used in accounting and finance to calculate the interest income or expense on bonds and loans over their life.

Unamortized Premium

The portion of the bond premium that has not yet been amortized or allocated as an expense over the bond's life.

Straight-Line Method

A depreciation method that allocates an equal portion of the initial cost of an asset to each accounting period over its useful life.

Amortization

The process of gradually writing off the initial cost of an asset over a period.