A Firm with a Very Low Current Ratio in Comparison

question 189

Multiple Choice

A firm with a very low current ratio in comparison to the industry standard could lower the risk of unavailable short-term funds by moving toward ________ financing strategy.

• A) the aggressive
• B) the conservative
• C) a permanent
• D) a seasonal

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Definitions:

Inventory Turnover Ratio

A financial efficiency ratio that shows how many times a company has sold and replaced inventory over a period.

Days' Sales

A measure of how quickly a company can convert its inventory into sales, often used to assess liquidity and operational efficiency.

Inventory Management

The practice of overseeing and controlling the ordering, storage, and use of components that a company will use in the production of items it will sell, as well as overseeing and controlling quantities of finished products for sale.

Merchandise Inventory

The total value of a company's goods that are ready for sale at any given time, including both finished goods and goods in various stages of production.