When Analyzing a Company's Current Ratio

question 31

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 2.0 and 2.5.
• 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:

Antibiotic

Medicinal compounds used to kill or inhibit the growth of bacteria, used in the treatment and prevention of bacterial infections.

Fetal Alcohol Syndrome

A condition resulting from alcohol exposure during pregnancy, causing growth problems, facial anomalies, and brain damage in the child.

Vitamin E

A group of fat-soluble compounds that act as antioxidants, protecting the body from damage caused by free radicals.

Pregnant

The state of carrying a developing fetus within the female body, typically lasting about 40 weeks from the last menstrual period to childbirth.