Which of the Following Statements Is True

question 64

Multiple Choice

Which of the following statements is true?

• A) The quick ratio is classified as an activity ratio.
• B) Current assets are expected to be converted into cash in less than 2 years.
• C) A firm's debt holders prefer a low quick ratio.
• D) Activity ratios go hand in hand with liquidity ratios
• E) Lower current ratios are always preferable.

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Definitions:

Double-entry Accounting

An accounting method that records each transaction twice, as both a debit and a credit, to ensure the accounting equation remains balanced.

Accounting Equation

The fundamental formula in accounting that represents the relationship between assets, liabilities, and owner's equity: Assets = Liabilities + Owner's Equity.

Net Worth

The total assets minus total liabilities of an individual or entity, representing financial position at a specific time.

Generally Accepted Accounting Principles

A collection of commonly-followed accounting rules and standards for financial reporting.