Which of the Following Is True of Current Ratio

question 140

Multiple Choice

Which of the following is true of current ratio?

• A) The more predictable a firm's cash flows, the higher the acceptable current ratio.
• B) A higher current ratio indicates a higher return on equity.
• C) The more predictable a firm's current ratio, the higher the current liabilities.
• D) A higher current ratio indicates a greater degree of liquidity.

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Definitions:

Parent

In corporate finance, refers to a company that holds a controlling interest in one or more subsidiary companies.

Subsidiary

A corporation that is governed by another corporation, referred to as the parent company, by possessing over 50% of its voting shares.

In-Process Research and Development

Expenditures on research and development activities that are not yet complete, which may be capitalized as an intangible asset.

Indefinite-Lived Asset

An asset that is not anticipated to be consumed or used up and does not have a definable useful life, such as certain trademarks or goodwill.