Which of the Following Is NOT True of Liquidity Ratios

question 54

Multiple Choice

Which of the following is NOT true of liquidity ratios?

• A) They measure the ability of a firm to meet short-term obligations with short-term assets without putting the firm in financial trouble.
• B) There are two commonly used ratios to measure liquidity-current ratio and quick ratio.
• C) For manufacturing firms, quick ratios will tend to be much larger than current ratios.
• D) The higher the liquidity ratios, the more liquid the firm and the better its ability to pay its short-term bills.

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Definitions:

Comparative Balance Sheets

Financial statements that present the financial position of an entity at different points in time, side by side, to facilitate comparison.