Question Details

An advantage of the current and acid-test ratios 



TRUE-FALSE STATEMENTS

1. An advantage of the current and acid-test ratios is they use year-end balances of current
asset and current liability accounts.
2. From a creditor's point of view, the higher the total debt to total assets ratio, the lower the
risk that the company may be unable to pay its obligations.
3. A current ratio of 1.2 to 1 indicates that a company's assets exceed its current liabilities.
4. Using borrowed money to increase the rate of return on common stockholders' equity is
called "trading on the equity."
5. Diversification in American industry limits the usefulness of financial analysis.


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