Question: Identify a true statement about current ratios used by entrepreneurs for valuation. Multiple choice question. It is a measure of risk because debt consists of

Identify a true statement about current ratios used by entrepreneurs for valuation. Multiple choice question. It is a measure of risk because debt consists of a fixed commitment in the form of interest and principal repayments. The entrepreneur need not compare this ratio with any industry standards It provides a measure of risk to creditors by considering the funds invested by creditors (debt) and investors. The current liabilities must be covered from cash or its equivalent

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2. Find out if there are other reference points that can be used as reasonable alternatives.

1. Identify your reference point when making a decision based on an element of risk.

3. If there are reasonable alternatives, think about your decisions based on the different reference points and see if there are any contradictions in the decisions.