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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Definitions:

Causally Related

Refers to entities or events that have a cause-and-effect correlation with one another.

Causality

The relation between causes and effects, often considered fundamental to the understanding and analysis of phenomena in various fields, including philosophy and science.

Conclusion

The final part of something, typically a process, argument, or story, or the judgment or decision reached by reasoning.

False Alternative

A logical fallacy that occurs when an argument unjustly limits the options to two when there are more possibilities.