A Deficiency of the Standard Measures of Liquidity Is That

question 71

Multiple Choice

A deficiency of the standard measures of liquidity is that the measures:

• A) ignore a firm's reserve borrowing capacity.
• B) fail to include accounts receivable as an asset.
• C) give inventories equal weighting in the quick ratio.
• D) do not include the current portions of long-term debt.

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Definitions:

Manufacturer

A business engaged in the transformation of raw materials into finished goods on a large scale for sale.

Merchandiser

A business or person that purchases goods to sell them at retail or wholesale, making a profit through the markup on sold goods.

Cost of Goods Sold

Costs directly linked to the creation of products sold by a business.

Fraud

Deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.