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Indicate Whether Each of the Following Statements Is True or False

Question 22

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Indicate whether each of the following statements is true or false.

Premises:
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.
Liquidity is the ability of a business to repay liabilities in the long run.
Operating cycles for most businesses are less than one year.
The current ratio is computed by dividing current assets by net income.
The current ratio is a useful measure of a company's liquidity.
Responses:
False
True

Correct Answer:

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.
Liquidity is the ability of a business to repay liabilities in the long run.
Operating cycles for most businesses are less than one year.
The current ratio is computed by dividing current assets by net income.
The current ratio is a useful measure of a company's liquidity.
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