If All Else Is Held Equal, an Increase in the Current

question 53

Multiple Choice

If all else is held equal, an increase in the current ratio of a company is generally considered to be an indication that:

• A)the company will have increased difficulty meeting short-term obligations.
• B)current liabilities have increased.
• C)the company will be better able to meet short-term debt obligations.
• D)current assets have decreased.

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Definitions:

Accounting Equation

A fundamental principle in finance representing the relationship: Assets = Liabilities + Equity.

Assets

Resources owned or controlled by a company, expected to produce future economic benefits.

Equity

The value of an ownership interest in property, including shareholders' equity in a business.

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.