Assignment 3: Research Application Discussion
The current ratio measures the degree to which current assets cover current liabilities. A high ratio indicates a good probability that the company can retire current debt. When long term debt exceeds stockholder’s equity, the current ratio will fall. What effect will reclassifying a long term investment into cash within one year have on the current ratio? Is a firm’s true financial position stronger as a result of reclassifying investments? What are the ethical ramifications of re-classifying investments? Give an example of when reclassifying a long term investment as a short term investment makes financial sense for the company.
By Saturday, June 3, 2017 respond to the discussion questions. Submit your response to the appropriate Discussion Area. Use the same Discussion Area to comment on your classmates’ submissions and continue the discussion until Wednesday, June 7, 2017. Comment on how your classmates would address differing views.
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