When Analyzing a Company's Current Ratio

question 44

Multiple Choice

When analyzing a company's current ratio:

• A)the current ratio is equal to total current assets divided by total liabilities.
• B)most successful businesses operate with current ratios between 0.1 and 0.5.
• C)a current ratio of less than 1.00 means that current liabilities exceed current assets.
• D)the industry the company is in should not be considered.

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Definitions:

Forgo

To give up or abstain from something. In economic terms, this often refers to the opportunity cost of choosing one option over another.

Budget

An estimate of income and expenditure for a set period, often used by governments, organizations, or individuals to plan financial operations.

Bananas

A widely consumed fruit, grown in tropical regions, known for its high potassium content.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, representing the benefits one misses out on.