Which of the following would indicate an improvement in a company's financial position, holding other things constant?
A) The inventory and total assets turnover ratios both decline.
B) The debt ratio increases.
C) The profit margin declines.
D) The times-interest-earned ratio declines.
E) The current and quick ratios both increase.

Question

Quizplus · Accepted Answer

An increase in the current and quick ratios would indicate an improvement in a company's liquidity and ability to pay its short-term obligations, thus improving its overall financial position. A decline in inventory and total assets turnover ratios, an increase in debt ratio, a decline in profit margin, and a decline in times-interest-earned ratio would all indicate a deterioration in the company's financial position.

Which of the Following Would Indicate an Improvement in a Company's