Questions
COMM_V 370 101-108 2025W1 COMM 370-Practice Midterm-2025-W1
Multiple choice
Which of the following statements about financial ratios are correct? Select ALL that apply.
Options
A.A current ratio far below 1 is a cause for concern.
B.Net working capital is defined as current assets less current liabilities.
C.A firm whose inventory period exhibits a lengthening trend will likely need to cut production.
D.Financial managers should always aim to maximize their liquidity ratios.
E.Financial ratios provide definitive (not relative) measures of a company's performance and condition.
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Step-by-Step Analysis
When evaluating statements about financial ratios, it's important to consider standard financial principles and how ratios are used in practice.
Option A: 'A current ratio far below 1 is a cause for concern.' A current ratio below 1 suggests current liabilities exceed current assets, which typically signals liquidity problems and potential short-term cash flow difficulties. This is generally a......Login to view full explanationLog in for full answers
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