Because the Assets Included in the Current Ratio Have Different

question 58

Multiple Choice

Because the assets included in the current ratio have different levels of liquidity that reflect different degrees of collectability,many companies use which of the following ratios to measure current liquidity?

• A)Current ratio.
• B)Acid-test.
• C)Working capital.
• D)Return on Equity.

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Definitions:

Homogeneous Product

Goods that are perfectly identical in quality, style, and substance, making them indistinguishable from products produced by competing companies.

Kinked Demand Curve Model

A model in oligopoly markets suggesting that firms may not change their prices because an increase could be ignored by rivals, while a decrease might be matched.

Price Stability

A situation in an economy where prices in general do not change significantly over time, minimizing uncertainty and conducive to economic growth.

Oligopolies

Market structures characterized by a small number of firms that have significant market power, which can influence prices and output levels.