Which of the Following Is Most Likely to Occur If

question 10

Multiple Choice

Which of the following is most likely to occur if a firm over-invests in net working capital?

• A) The current ratio will be lower than it should be.
• B) The quick ratio will be lower than it should be.
• C) The return on investment will be lower than it should be.
• D) The times interest earned ratio will be lower than it should be.

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Definitions:

Relevance

The degree to which something is related or useful to the matter at hand.

Scope

The extent or range of view, reach, application, effectiveness, or influence of an object, discussion, or analysis.

Range

The difference between the highest and lowest values in a set of numbers, indicating the spread or dispersion.

Theory

A system of ideas intended to explain something, based on general principles independent of the thing to be explained, often tested and grounded in evidence.