If You Wish to Evaluate the Liquidity of a Firm

question 46

Multiple Choice

If you wish to evaluate the liquidity of a firm, you could look at the

• A)current ratio.
• B)debt ratio.
• C)inventory turnover.
• D)return on net assets.

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Definitions:

Profitability Index

A financial tool that calculates the relative profitability of an investment by dividing the present value of future cash flows by the initial investment cost.

Initial Investment

The initial amount of money invested in a project or business venture.

CCA Rate

Refers to Capital Cost Allowance rate, which is the rate at which a business can claim tax depreciation on certain properties or equipment in Canada.

CCA Class

Canadian Capital Cost Allowance Class; a categorization in Canadian tax law that determines the depreciation rate for tax purposes on different types of assets.