Chapter 2--Analysis of Fina - Copy

Which of the following statements is correct a in the

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58. Which of the following statements is correct? A. In the text, depreciation is regarded as a use of cash because it reduces fixed assets, which then must be replaced. B. If a company uses some of its cash to pay off short-term debt, then its current ratio will always decline, given the way ratio is calculated, other things held constant. C. During a recession, it is reasonable to think that most companies inventory turnover ratios will change while their fixed asset turnover ratio will remain fairly constant. D. During a recession, we can be confident that most companies' DSOs (or ACPs) will decline because their sales will probably decline. E. Each of the above statements is false. 59. As a short-term creditor concerned with a company's ability to meet its financial obligation to you, which one of the following combinations of ratios would you most likely prefer? Current Debt ratio TIE ratio 60. Which of the following statements about ratio analysis is incorrect ? 61. Yesterday, Bicksler Corporation purchased (and received) raw materials on credit from its supplier. All else equal, if Bicksler's current ratio was 2.0 before the purchase, what effect did this transaction have on Bicksler's current ratio?
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62. Bubbles Soap Corporation has a quick ratio of 1.0 and a current ratio of 2.0 implying that A. the value of current assets is equal to the value of inventory. B. the value of current assets is equal to the value of current liabilities. C. the value of current liabilities is equal to the value of inventory. D. All of the above. E. None of the above.
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