Higgins Company Presently Has a Current Ratio of 0

question 72

Multiple Choice

Higgins Company presently has a current ratio of 0.6.It is currently negotiating a loan,but it has been informed it must improve its current ratio before the loan will be approved.Which of the following actions would improve its current ratio?

• A)Pay off a portion of its long-term debt.
• B)Use cash to pay off some current liabilities.
• C)Purchase additional inventory on credit.
• D)Collect some of the current accounts receivable.

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Definitions:

Repaid

The act of paying back money that was borrowed.

Interest Rate

The portion of borrowed funds or capital utilized that incurs a cost, traditionally mentioned as a percentage for each year.

Loan

A financial agreement where a lender provides funds to a borrower, who agrees to repay the amount with additional interest over a defined period.

Economic Value

Assessing the value that a good or service delivers to someone involved in the economy.