In Comparing the Current Ratios of Two Companies,why Is It

question 46

Multiple Choice

In comparing the current ratios of two companies,why is it invalid to assume that the company with the higher current ratio is the better company?

• A) The two companies may be different sizes.
• B) A high current ratio may indicate inadequate inventory on hand.
• C) The two companies may define working capital in different terms.
• D) A high current ratio may indicate inefficient use of various assets and liabilities.

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Definitions:

Prisoners' Dilemma

A scenario in game theory where two individuals acting in their own best interest do not result in the optimal outcome for either of them.

Confesses

To admit or acknowledge something typically that one feels guilty or ashamed of, often involving a wrongdoing.

Public Goods Dilemma

A situation in which individuals must choose between self-interest and collective benefit in the context of resources that are freely available to all regardless of individual contribution.

Cleans Up

In a negotiation or competitive situation, to emerge notably successful or victorious, often by a large margin.