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

Question

Quizplus · Accepted Answer

An increase in the current and quick ratios indicates that the company has more liquidity and is better able to meet short-term obligations. This would suggest an improvement in the company's financial position, as it is better equipped to handle its current obligations. Contrarily, options B, C, D, and E all indicate a decline in financial position, as each represents a decrease in profitability, efficiency or increases in debt.

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