Chapter 17, Problem 17.1DC

To determine

Current ratio: A part of liquidity ratios, current ratio reflects the ability to oblige the short term debts of a company. It is calculated based on the current assets and current liabilities; a company has in an accounting period. Current ratio is useful tool for analysis of financials of a company.

Debt ratio: It is the ratio between total assets of the company and the total liabilities. Debt ratio reflects the finance strategy of the company. It is used to evaluate company’s ability to pay its debts. Higher debt ratio implies the higher financial risk.

1.

To identify: The financial ratios affected by the action to hold onto the checks until January.

To determine

2.

To identify: The purpose of B by the action to hold onto the checks until January.