A 'High Current Ratio' indicates: MCQ with Answer and Explanation

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A 'High Current Ratio' indicates:

A. Insolvency

B. Excess liquidity, possibly inefficient use of assets

C. Poor liquidity

D. High profitability

Answer: Option B

Solution (By JKSSB Mock Tests)

Very high current ratio may indicate idle current assets, not necessarily good.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

The term 'Liquidity Ratio' includes:

A. Debt-Equity Ratio and Proprietary Ratio

B. Stock Turnover Ratio and Debtors Turnover Ratio

C. Current Ratio and Quick Ratio

D. Gross Profit Ratio and Net Profit Ratio

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Correct Answer: Option C

Explanation:
Liquidity ratios measure the short-term solvency of a firm and include the Current Ratio and the Quick (or Acid-Test) Ratio.

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Question #2

Social Accounting primarily benefits:

A. Shareholders only

B. Government only

C. Competitors

D. Society at large by disclosing social costs and benefits

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Correct Answer: Option D

Explanation:
It provides information to stakeholders about the social impact of an entity.

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Question #3

The concept of 'Going Concern' assumes that:

A. The business will continue operations indefinitely

B. The business will be liquidated soon

C. The business is not viable

D. Profits are not important

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Correct Answer: Option A

Explanation:
Going concern concept assumes that the enterprise will continue in operation for the foreseeable future, and has no intention to liquidate.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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