Multiple Choice Question 196 Which of these is not a liquidi

Multiple Choice Question 196 Which of these is not a liquidity ratio? 196 a. Asset turnover b. Accounts receivable turnover c. Inventory turnover d. Current ratio

Solution

Solution:

1) Asset turnover .. Not a liquid ratio.

2) Account receivable turnover ...Not a liquid ratio.

3) Inventory turnover ...Not a liquid ratio.

4) Current ratio... Liquid ratio

Explanation: Liquidity refers to the company\'s ability to meet its financial obligations as they come due. Two fequently used liquidity ratio are current ratio and quick ratio.

Current ratio = Current assets / Current liabilites

Quick ratio = Current assets -inventory / Current liabilites