Which of the Following Ratios Would Be Useful in Assessing

question 18

Multiple Choice

Which of the following ratios would be useful in assessing short-term liquidity?

• A) Current ratio, inventory turnover, fixed asset turnover.
• B) Quick ratio, average collection period, cash conversion cycle.
• C) Average collection period, debt ratio, return on assets.
• D) Current ratio, cash interest coverage, cash-flow liquidity ratio.

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Definitions:

Implicit Costs

Input costs that do not require an outlay of money by the firm

Outlay

The amount of money spent on a particular item or service, serving as expenses in financial transactions or projects.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing between options.

Capital

Economic resources that are used to create goods and services, such as buildings, machinery, and equipment.