Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You calculate a current ratio of 1.3 for International Food Corp. and you find that the industry average is 2.1. Which of the following statements
You calculate a current ratio of 1.3 for International Food Corp. and you find that the industry average is 2.1. Which of the following statements is or could be correct? The low current ratio may be of minor concern if the company is the only company in the industry that applies just-in-time with respect to their inventory. To get a better picture of the liquidity situation of the company you should also calculate the quick ratio. The company has a lower liquidity level than the industry. If the company holds large levels of inventory, the company may soon have problems to pay its short-term obligations when they are due. All of the answers are correct The greater the degree of financial leverage employed by a firm, the: lower the probability of bankruptcy lower the potential return to stockholders lower the net working capital lower the potential for financial distress greater the level of debt
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started