If the Only Information You Are Given About Ryan Corporation

question 48

Multiple Choice

If the only information you are given about Ryan Corporation, a large public company in business for many years, is that it has a current ratio of 2.9, what could you infer from this?

• A) It can meet the short-term obligations without any difficulty.
• B) You could determine that Ryan has a liquidity problem because Ryan's current ratio is greater than 2 which is the rule of thumb for the current ratio.
• C) Nothing, you would also need the current ratio's from the last few years of the S&P 500 Index.
• D) You could determine that Ryan has an activity problem because Ryan's current ratio is greater than 2 which is the rule of thumb for the current ratio.

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Definitions:

Property, Plant, and Equipment

Long-term tangible assets that a company uses in its operations and that are expected to provide benefits for more than one year.

Standard Cost

A predetermined cost of manufacturing a product or providing a service, under normal conditions, which serves as a benchmark for measuring performance.

Direct Labor Workers

Direct Labor Workers are employees who are directly involved in the production of goods or services, whose wages are considered part of the direct costs of production.

Fixed Overhead

Costs that do not change with the level of production or sales, such as salaries, rent, and insurance, which are necessary for the operation but do not vary with the volume of output.