A Company Has Liquid Assets of $5 Million and Net

question 100

Multiple Choice

A company has liquid assets of $5 million and net income of $10 million.Current liabilities total $2.5 million,interest expense is $2 million,and income tax expense is $3 million.What is the quick ratio for the company?

• A)0.5
• B)7.5
• C)0.3
• D)2.0

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Definitions:

Gross Profit to Sales

A financial ratio that determines the percentage of gross profit relative to sales revenue, indicating the efficiency of production and pricing.

Theoretical Assumptions

Foundational ideas or principles assumed to be true without immediate empirical testing, used as the basis for further theory development or analysis.

Conservatism

An accounting principle that advises to exercise caution and report expenses and liabilities as soon as possible, but to delay the recognition of revenues and assets.

Gross Profit Method

An inventory estimation technique that determines the cost of goods sold and ending inventory using the gross profit margin.