Desktop Co

question 7

Multiple Choice

Desktop Co. presently has a current ratio of 1.2 and an acid-test ratio of 0.8. Prepaying next year's office rent of $50,000 will:

• A) have no effect on either the company's current ratio or its acid-test ratio.
• B) have no effect on the company's current ratio but will decrease its acid-test ratio.
• C) decrease the company's current ratio and decrease its acid-test ratio.
• D) increase the company's current ratio and increase its acid-test ratio.

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Definitions:

United Nations

An international organization founded in 1945 aimed at promoting peace, security, and cooperation among countries.

Import Tariff

A tax imposed by a government on goods and services imported from other countries, used to control trade.

Deadweight Loss

A loss of economic efficiency that can occur when equilibrium in a market is not achieved or is not achievable.

Free Trade

An economic policy that allows imports and exports among member countries with little to no tariff barriers, quotas, or subsidies.