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:

Earnings Rate

Earnings rate refers to the percentage of return generated by an investment or the profitability of a company over a specified period.

Present Value Index

A ratio used to estimate the present value of an investment's benefits divided by the present value of its costs.

Net Cash Flow

The amount of cash generated or used by a company in a given period, calculated as cash inflows minus cash outflows.

Capital Investment

Funds spent by a company to purchase, maintain, or improve physical assets such as property, industrial buildings, or equipment.