Liquidity Ratio Analysis

Which of the following is a key factor that affects the current-year liquidity of a firm?

Slower paying customers

The source of information for calculating the current ratio is in the __________.

total assets minus long-term assets and total liabilities minus long-term liabilities balance sheet

The current ratio is important because it can tell __________.

whether a firm is solvent

A company's current ratio is 1.4; its current liabilities are $55,000; its long-term liabilities are $150,000; its property, plant, and equipment are $275,000; cash is $25,000; and inventories are $33,000. Its accounts receivables are __________ if there are no other current assets.

$19,000

Based on the given excerpts from Firm A's balance sheet, which of the following would be its current ratio?

(Cash + Receivables + Inventories) / (Short-term debt + Accounts payables)

If Company A has current assets of $235,000 and current liabilities of $300,000, then its current ratio would be __________.

0.78 current assets divided by current liabilities

If a firm has $100,000 in current assets and $95,000 in current liabilities, then its current ratio would be

1.05%

If a firm has $330,000 total assets with $110,000 noncurrent assets and $170,000 in current liabilities reported on its 2016 financial statements and $220,000 total assets with $125,000 noncurrent assets and $160,000 current liabilities on its 2015 financial statements, then the firm's current ratio for 2016 is __________.

1.29 (2016 total assets - 2016 noncurrent assets) / (2016 current liabilities) 1.29

If you were the chief financial officer (CFO) of a company, how would you improve your current ratio?

By increasing revenues By selling your inventories By reducing accounts payables

The current ratio shows which of the following?

How easily short-term obligations can be met

A company with a current ratio of 1.3 changes its accounts receivables terms from 15 days to 30 days. What does this do to the current ratio?

It increases the accounts receivables, thus raising the current ratio. The current ratio increases only if cash stays the same

Which of the following actions would not improve the current ratio?

Using the corporate credit card to make purchases Reducing inventories Investing cash reserves into bonds

The current ratio is used to __________.

compare the current assets to the current obligations

When using the balance sheet to calculate the current ratio, you would use the __________.

current assets and the current liabilities

If a firm has current assets of $130,000, current liabilities of $95,000, and long-term debt of $125,000, its current ratio is __________.

current assets divided by current liabilities

If you wanted to measure the liquidity of a company, you would calculate its

current ratio

If a firm wants to raise its current ratio, it can __________.

improve its profitability lower its short-term debt

The liquidity ratio that deducts inventories from the current assets is the

quick

When looking at the current ratio, you can determine a company's __________.

ratio of current assets to current liabilities