Short term investment makes financial sense

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Reference no: EM1375398

The present ratio measures the degree to which current assets cover current liabilities. A high ratio indicates a good probability that company will 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 present ratio? Is a firm's true financial position stronger as a result of reclassifying investments? What are ethical ramifications of reclassifying investments? Provide an example of when reclassifying a long term investment as a short term investment makes financial sense for company.

Reference no: EM1375398

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