Which of the Following Statements Is an Accurate Interpretation of the Current

question 4

Multiple Choice

Which of the following statements is an accurate interpretation of the current ratio?

• A)A current ratio of 0.60 or lower is a good,safe ratio.
• B)A current ratio below 1.00 is considered a good,safe ratio.
• C)A current ratio of 2.0 indicates a very strong ability to pay current liabilities.
• D)A current ratio of 1.5 or higher is considered a high-risk ratio.

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Definitions:

Face Value

The nominal or dollar value printed on a security or financial instrument, such as a bond or stock certificate.

Interest Rate

The percentage of a loan that is incurred as interest by the borrower, usually represented as an annual percentage of the outstanding loan amount.

Non-Interest-Bearing

Describes a financial instrument that does not generate interest income for the holder.

Promissory Note

A pecuniary promise recorded in a document, where one side agrees to pay a definite financial sum to the other, available either on demand or on a date in the future that has been agreed upon.