A Firm with a High Liquidity Ratio Is Definitely Practising

question 36

Multiple Choice

A firm with a high liquidity ratio is definitely practising effective working capital management.This statement is:

• A)True, higher liquidity means that the firm has more cash than it spends.
• B)False, higher liquidity means payables are paid much later than receivables and this hurts the firm's reputation
• C)True, higher liquidity ratio means receivables are greater than payables.
• D)False, the firms' working capital management policy may be too conservative or too lenient

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