Questions
Questions

Business Finance Exam 1 Practice

Single choice

4.4: A company’s quick ratio is 1.2. What does this indicate about its liquidity?

Options
A.It cannot meet short-term obligations
B.It has sufficient liquid assets to cover current liabilities
C.It relies heavily on inventory
D.It has no debt
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Step-by-Step Analysis
To assess what a quick ratio of 1.2 implies about liquidity, we evaluate each statement in light of what the quick ratio measures. Option 1: 'It cannot meet short-term obligations' This is not accurate because the quick ratio excludes inventory and compares liquid assets to current liabilities. A ratio ......Login to view full explanation

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