Indicate the answer choice that best completes the statement or answers the question. 1. Economic theory teaches that differences in market returns must relate to differences in:

a. book value

b. perceived risk

c. price-earnings ratio

d. bankruptcy risk

2. One common problem with the current ratio is that it is susceptible to "window dressing." If prior to the end of the accounting period Saxon Company has a current ratio of 1.5 and management wishes to boost its current ratio it may decide to: a. pay off accounts payable prior to year-end

b. purchase more inventory on account.

c. purchase short-term investments with cash.

d. purchase more inventory with cash.