Advertisements
Advertisements
Question
Two basic measures of liquidity are ______.
Options
Inventory Turnover and Current Ratio
Current Ratio and Quick Ratio
Gross Profit Ratio and Operating Ratio
Current Ratio and Average Collection Period
Current Ratio and Working Capital Turnover Ratio.
Advertisements
Solution
Two basic measures of liquidity are current ratio and quick ratio.
Explanation:
The two primary measures of liquidity are the Current Ratio and the Quick Ratio, which assess a company’s ability to meet its short-term obligations. The Current Ratio compares total current assets to current liabilities, offering a broad view of short-term financial health. The Quick Ratio provides a stricter test of immediate cash liquidity by measuring only the most liquid assets, explicitly excluding inventory and prepaid expenses.
