Author Question: Which of the following is true of current ratio? A) The more predictable a firm's cash flows, the ... (Read 108 times)

PhilipSeeMore · **on:** Jul 11, 2018

Which of the following is true of current ratio?

A) The more predictable a firm's cash flows, the higher the acceptable current ratio.
B) A higher current ratio indicates a higher return on equity.
C) The more predictable a firm's current ratio, the higher the current liabilities.
D) A higher current ratio indicates a greater degree of liquidity.

Question 2

The purpose of the restrictive debt covenant that limits the distribution of profits to shareholders is to ________.

A) assure the lender that additional borrowing is constrained or may be subordinated to the original loan
B) limit the amount of fixed-payment obligations
C) ensure a cash shortage does not cause an inability to meet current obligations
D) avoid default of payments to bondholders