Which of the Following Combinations of Ratios Is Preferable

question 61

Multiple Choice

Which of the following combinations of ratios is preferable?

• A) a high current ratio and a low debt ratio
• B) a low current ratio and a high debt ratio
• C) a high current ratio and a high debt ratio
• D) a low current ratio and a low debt ratio

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Definitions:

Total Asset Turnover

A financial ratio that measures a company's efficiency in using its assets to generate sales or revenue, calculated as sales divided by total assets.

Net Sales

The sum of sales income remaining after subtracting the value of returns, allowances for damaged or missing items, and discounts.

Acquired Assets

Assets obtained through purchase or merger, typically contributing to the owner's financial position.

Appraised

The process of estimating the value of an asset or property, often conducted by a professional appraiser.