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The Current and Quick Ratios Both Help Us Measure a Firm's

question 78

True/False

The current and quick ratios both help us measure a firm's liquidity.The current ratio measures the relationship of the firm's current assets to its current liabilities,while the quick ratio measures the firm's ability to pay off short-term obligations without relying on the sale of inventories.


Definitions:

Future Value

The value of a current asset at a specified future date, based on an expected rate of growth or return.

Annuity Due

An annuity for which the payment is due immediately at the beginning of each period, rather than at the end.

Ordinary Annuities

Identical financial amounts distributed at the termination of back-to-back periods, within a set period.

Annuities Due

An annuity for which the payment is due at the beginning of each period instead of at the end, often used in lease agreements and insurance premiums.

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