A Company Reports the Following in Relation to Its Latest

question 21

Multiple Choice

A company reports the following in relation to its latest financial year:
$$\begin{array} { l r } \text { Current assets } & \$ 175 \\\text { Non-current assets } & 300 \\\text { Current liabilities } & 50 \\\text { Non-current liabilities } & 250\end{array}$$ Writing a cheque for $25 to pay off some long-term debentures payable means that the current ratio will be:

• A) 7.0 times
• B) 3.0 times
• C) unchanged
• D) 5.5 times

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Definitions:

Short Sale

A transaction where an investor borrows a security and sells it on the open market, planning to buy it back later at a lower price.

Maintenance Margin

The minimum amount of equity that must be maintained in a margin account after a purchase has been made, to continuing holding the position.

Secondary Markets

Markets where investors buy and sell securities or assets from other investors, rather than from issuing companies directly.

Original Issue

The first issuance of a security or financial instrument to the public or to investors.