Indicate whether each of the following statements about financial statement analysis is true or false.________ a) Working capital is a measure of the amount of current assets a company would have left after paying its current liabilities.________ b) If a transaction causes a company's working capital to increase, the transaction caused the company to become less liquid.________ c) Interpretation of a company's current ratio can be difficult because it is an absolute amount.________ d) The quick ratio is a more conservative variation of the current ratio.________ e) The quick ratio is usually calculated by using the following equation: (cash + receivables + current marketable securities) ÷ current liabilities.
What will be an ideal response?
a) T b) F c) F d) T e) T
a) Working capital is a measure of the amount of current assets a company would have left after paying its current liabilities.
b) If a transaction causes a company's working capital to increase, the transaction may have caused the company to become more liquid.
c) Interpretation of a company's working capital can be difficult because it is an absolute amount.
d) The quick ratio is a more conservative variation of the current ratio.
e) The quick ratio is usually calculated by using the following equation: cash + receivables + current marketable securities ÷ current liabilities.
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