Which of the Following Statements Is CORRECT

question 114

Multiple Choice

Which of the following statements is CORRECT?

• A) Net working capital is defined as operating current assets minus the difference between current liabilities and notes payable,and any increase in the current ratio automatically indicates that net working capital has increased.
• B) Although short-term interest rates have historically averaged less than long-term rates,the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing.
• C) If a company follows a policy of "matching maturities",this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt.
• D) Net working capital is defined as operating current assets minus the difference between current liabilities and notes payable,and any decrease in the current ratio automatically indicates that net working capital has decreased.
• E) If a company follows a policy of "matching maturities",this means that it matches its use of short-term debt with its use of long-term debt.

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Definitions:

Earnings Per Share

A financial metric indicating the portion of a company's profit allocated to each outstanding share of common stock, measuring its profitability on a per-share basis.

IFRS

International Financial Reporting Standards, a set of global accounting guidelines for preparing financial statements.

GAAP

Stands for Generally Accepted Accounting Principles, which are a collection of commonly-followed accounting rules and standards for financial reporting in the United States.

If Converted Method

An accounting method used to calculate diluted earnings per share, assuming all convertible securities were converted to common stock.