A Company Has a Cash Ratio of 2

question 63

Multiple Choice

A company has a cash ratio of 2.3.What does this imply?

• A) The company has an unnecessarily large amount of cash and cash equivalents.
• B) The company does not have enough cash supply.
• C) The company is not in a position to pay off its long-term liabilities.
• D) The company is not in a position to pay off its current liabilities.

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Definitions:

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Units

Refers to a standard quantity or measurement used for comparison and calculation, such as in physics or mathematics.

Month

A unit of time, approximately 30 days, used as a standard measurement for billing cycles, budgeting, and financial forecasting.

Variable Cost

Costs that vary directly with the level of production or output, such as materials and labor costs.