All of the Following Regarding the Current Ratio Are True

question 50

Multiple Choice

All of the following regarding the current ratio are true except:

• A) Current ratio is calculated by dividing current assets by current liabilities.
• B) Current ratio can reveal challenges in covering short-term obligations if it is less than 1.
• C) Current ratio can affect a creditor's decision about whether to lend money to a company.
• D) Current ratio does not affect a creditor's decision on whether to allow a company to buy on credit.
• E) Current ratio helps to assess a company's ability to pay its debts in the near future.

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Definitions:

Correct Rejection

In signal detection theory, the decision to correctly identify the absence of a signal or stimulus.

Miss

To fail to hit, reach, catch, or otherwise make contact with something; can also refer to feeling sadness from the absence or loss of someone or something.

False Alarm

An error in which a warning or alert is given, but no actual threat or danger exists.

Noise Hit

In signal detection theory, an instance where a non-target stimulus is incorrectly detected as a target signal.