The Current Ratio and Inventory Turnover Ratio Measure the Liquidity

question 101

True/False

The current ratio and inventory turnover ratio measure the liquidity of a firm.The current ratio measures the relation of a firm's current assets to its current liabilities and the inventory turnover ratio measures how rapidly a firm turns its inventory back into a "quick" asset or cash.

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Definitions:

Debt-to-Assets Ratio

A metric showing the proportion of a company's total assets financed through debt, providing insight into the company's financial leverage.

Flotation Costs

The costs associated with issuing new securities, including underwriting fees, legal fees, and registration fees.

After-Tax Cash Inflows

After-tax cash inflows represent the net cash a company receives from its operations, investments, or financial activities, after all taxes have been deducted.

Flotation Cost

The total costs a company incurs when it issues new securities, including underwriting fees, legal fees, and registration fees.