The Most Common Liquidity Ratio Is Current Assets to Current

question 14

Multiple Choice

The most common liquidity ratio is current assets to current liabilities,which is also called the

• A)debt-equity ratio.
• B)current ratio.
• C)profit loss ratio.
• D)return on investment ratio.
• E)stockholders' equity ratio.

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Definitions:

Federal Reserve

The central banking system of the United States, responsible for implementing the country's monetary policy and regulating its financial institutions.

Liquidity

A measure of the ease with which an asset can be converted into money without a significant loss of value.

Significant Loss

A substantial reduction in the value of an asset or a large financial deficit experienced by an individual or entity.

Required Reserve Ratio

The fraction of deposits that banks are legally required to keep as reserves, either in their vaults or with the central bank.