Which of the Following Statements Is an Accurate Interpretation of the Current

question 104

Multiple Choice

Which of the following statements is an accurate interpretation of the current ratio?

• A) A current ratio of 1.5 or higher is considered a high-risk ratio.
• B) A current ratio below 1.00 is considered a good, safe ratio.
• C) A current ratio of 2.0 indicates very strong ability to pay current liabilities.
• D) A current ratio of 0.60 or lower is a good, safe ratio.

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Definitions:

Par Value

The nominal or face value of a stock or bond, representing the value stated in the corporate charter or on the certificate.

Common Stock

An equity instrument indicating ownership in a company, which provides the holder with voting privileges and a share in the company's profits through dividends.

Stockholders' Equity

The portion of a company's capital that is owned by its shareholders, calculated as the company's total assets minus its total liabilities.

Cumulative

Describes something that increases or accumulates over time, often used in the context of investments or financial statements.