Answer to QUESTION 5:
The current ratio measures the company's liquidity, which is the ability to pay off short-term liabilities with short-term assets. The ideal current ratio for a business is 2:1 or higher, implying that it has twice the current assets than current liabilities.
A firm with a current ratio of 1 indicates that it has an equal amount of current assets and current liabilities. To improve its liquidity ratios, the firm might decrease current liabilities by utilizing more long-term debt, thereby increasing the current and quick ratios. So, the correct answer is option A.
Answer to QUESTION 6:
Net profit margin represents the percentage of each sales dollar remaining after the company has paid for its goods. It represents how much revenue is generated per dollar of sales after all expenses have been accounted for.
The formula for calculating the net profit margin is:
Net Profit Margin = Net Income / Total Revenue
So, the correct option is C, i.e., Net profit margin.