Liquidity Is

question 71

Multiple Choice

Liquidity is:

• A)a measure of the use of debt in a firm's capital structure.
• B)equal to current assets minus current liabilities.
• C)equal to the market value of a firm's total assets minus its current liabilities.
• D)valuable to a firm even though liquid assets tend to be less profitable to own.
• E)generally associated with intangible assets.

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Definitions:

Free Trade Credit

Credit received during the discount period.

Discount Period

The time frame during which a bill or invoice can be paid at a reduced rate before full payment is required.

Marketable Securities

Investments that can be converted to cash on very short notice and provide at least a modest return.

Net Operating Working Capital

A measure of a company's liquidity that takes into account the difference between its operating current assets and its operating current liabilities.