Which of the Following Statements Regarding Liquidity Ratios Is False

question 118

Multiple Choice

Which of the following statements regarding liquidity ratios is false?

• A)A high current ratio generally indicates the ability to pay current liabilities on a timely basis.
• B)A high acid-test ratio generally indicates the ability to pay current liabilities on a timely basis.
• C)All current assets are due within one year and therefore have essentially equal liquidity.

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Definitions:

Tax Shield

A reduction in taxable income for individuals or corporations achieved through claiming allowable deductions.

Tax Rate

The percentage at which an individual or corporation is taxed. The government sets the rate, which can apply to income, capital gains, or other financial figures.

Straight-Line Depreciation

A procedure for assigning the cost of a solid asset over its productive lifetime in equal annual figures.

Marginal Tax Rates

The rate at which an individual or corporation's next dollar of taxable income is taxed.