Podcast
Questions and Answers
Which of the following ratios compares a company's most liquid assets to its current liabilities?
Which of the following ratios compares a company's most liquid assets to its current liabilities?
- Current Ratio
- Asset Turnover Ratio
- Debt Ratio
- Quick Ratio (correct)
If a company has $100,000 in current assets, $80,000 in current liabilities, and $50,000 in inventory, what is the company's Quick Ratio?
If a company has $100,000 in current assets, $80,000 in current liabilities, and $50,000 in inventory, what is the company's Quick Ratio?
- 0.25
- 0.50
- 2.00
- 1.25 (correct)
If a company's Current Ratio is 2.5 and its Acid-Test Ratio is 1.8, which statement is true?
If a company's Current Ratio is 2.5 and its Acid-Test Ratio is 1.8, which statement is true?
- The company has no inventory.
- The company has negative inventory.
- The company has a small amount of inventory relative to its current assets.
- The company has a significant amount of inventory relative to its current assets. (correct)
Which of the following ratios measures a company's ability to meet its short-term obligations using all of its current assets?
Which of the following ratios measures a company's ability to meet its short-term obligations using all of its current assets?
If a company has $200,000 in current assets, $150,000 in current liabilities, and $50,000 in cash and cash equivalents, what is the company's Cash Ratio?
If a company has $200,000 in current assets, $150,000 in current liabilities, and $50,000 in cash and cash equivalents, what is the company's Cash Ratio?
Flashcards
Quick Ratio
Quick Ratio
Compares a company's most liquid assets to its current liabilities.
Current Ratio
Current Ratio
A measure of a company's ability to meet its short-term obligations using all of its current assets.
Cash Ratio
Cash Ratio
Measures a company's ability to pay off its debts using only cash and equivalents.
Current Ratio vs. Acid-Test Ratio
Current Ratio vs. Acid-Test Ratio
A high Current Ratio and a lower Acid-Test Ratio (Quick Ratio) means that the company has a significant amount of inventory compared to its other current assets.
Signup and view all the flashcards
Calculating Cash Ratio
Calculating Cash Ratio
Calculates the ratio of cash and cash equivalents to current liabilities. In this case, $50,000 / $150,000 = 0.33.
Signup and view all the flashcardsStudy Notes
Liquidity Ratios
- The Current Ratio is calculated by dividing Current Assets by Current Liabilities.
- The Acid-Test Ratio, also known as the Quick Ratio, focuses solely on a company's ability to cover short-term obligations with cash and cash equivalents.
- The Quick Ratio excludes Inventory and Prepaid Expenses from current assets.
- The ratio that measures the number of times a company's current assets can cover its current liabilities is the Current Ratio.
- The Cash Ratio is a liquidity ratio that focuses on a company's ability to cover short-term obligations with cash and cash equivalents.
- The Working Capital Ratio is not a liquidity ratio that measures a company's ability to cover short-term obligations with cash and cash equivalents.
- The Debt Ratio is a solvency ratio, not a liquidity ratio, and it measures a company's ability to pay its long-term obligations.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
