Which of the Following Statements Is Incorrect

question 7

Multiple Choice

Which of the following statements is incorrect?

• A) It is possible for a profitable company to go out of business because of short-term liquidity problems
• B) If a company has a current ratio greater than 2, it will never go out of business because of liquidity problems
• C) The current ratio is always greater than or equal to the quick ratio
• D) The accuracy of a cash flow forecast is inversely related to the forecast horizon.

---

Definitions:

Ledger

A record that consolidates all transactions related to a particular account, facilitating the preparation of financial statements.

Analyzed

The process of examining data or a financial statement in detail to extract insights or identify trends.

Effect

The impact or outcome that results from a specific cause or action, often analyzed in studies to understand causal relationships.

Ledger Accounts

Records that summarize the transactions related to a particular item over a period, creating a record of each financial transaction that takes place.