A Firm Has a Current Ratio of 1

question 92

Multiple Choice

A firm has a current ratio of 1.To increase that ratio the firm might ________.

• A)develop a better inventory management system so the firm doesn't have to hold as many items in inventory at one time
• B)hold lower cash balances at the bank and increase holdings of interest-earning marketable securities
• C)take out a long-term bank loan and simultaneously offer customers better credit terms,allowing them to pay their bills more slowly
• D)issue bonds and use the proceeds to purchase new equipment

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases, inversely related to income elasticity.

Demand

The amount of a product or service that consumers are prepared and capable of buying at different price levels over a specific time frame.

Related Goods

Related goods are goods that can either be substitutes or complements to each other, affecting each other's demand and consumption patterns.