Question

________ a) Operating cycles for most businesses are less than one year. ________ b) If a business does not plan to use any of its current assets to repay a debt, then that debt is listed as long term even if it is due within a year. ________ c) The current ratio is computed by dividing current assets by net income. ________ d) The current ratio is a useful measure of a company's liquidity. ________ e) Liquidity is the ability of a business to repay liabilities in the long run.

Answer 1

a) True: Operating cycles for most businesses are less than one year.

b) True: If a business does not plan to use any of its current assets to repay a debt, then that debt is listed as long term even if it is due within a year.

c) False: The current ratio is computed by dividing current assets by net income.

d) True: The current ratio is a useful measure of a company's liquidity.

e) False: Liquidity is the ability of a business to repay liabilities in the long run.