The Statement Concerning the Current Working Capital)ratio That Is Incorrect

question 41

Multiple Choice

The statement concerning the current working capital) ratio that is incorrect is: e.g.by using cash to pay off short-term debt

• A)A low current ratio may indicate difficulty in meeting short-term commitments
• B)A current ratio of $1.50 of current assets for each $1 of current liabilities should always be maintained
• C)A high current ratio may indicate excessive investment in working capital
• D)The current ratio can be manipulated at balance date,

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Definitions:

Overhead Cost

General expenses related to the day-to-day operations of a business that cannot be directly linked to a specific product or service.

Activity-based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate allocation of costs to products.

Overhead Cost

Expenses related to the operation of a business that cannot be directly linked to a specific product or service.

Customer Margin

The profit generated from a particular customer, calculated by subtracting the costs directly associated with serving them from the revenue they generate.