Answered: Having both current and quick ratios…

Name: Having both current and quick ratios with values greater than 1.0 alw
Uploaded: 2024-03-20T06:33:21.000Z
Channel: Bartleby
Description: Having both current and quick ratios with values greater than 1.0 always indicates that the firm is managing its liquidity position well True or false

Business

Finance

Having both current and quick ratios with values greater than 1.0 always indicates that the firm is managing its liquidity position well True or false

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter3: Analysis Of Financial Statements

Section: Chapter Questions

Problem 4MC

See similar textbooks

Related questions

Q: Which of the following typically is true for profitability ratios? a. Growth stocks have lower price…

A: Profitability ratios are calculated to assess the company's ability to generate incomes relative to…

Q: Th e most stringent test of a company’s liquidity is its:B . quick ratio

A: Introduction: Liquidity is a calculation of how easily a business can transform its liquid assets…

Q: Which of the following statements is most correct?(a) P/E ratios are higher for firms with high…

A: The question is based on the concept of market value and book value of shares. Price to earnings…

Q: Why is a high quick ratio not always a good indication of a well-managed liquidity position?

A: Liquidity: Liquidity means how quickly you can get your hands on your cash. Liquidity is to get your…

Q: ___ indicate the ability of the firm to meet its short-term financial obligations. a.…

A: Ratio measurement is in terms of Financial world, depicts that a sole accounting data by itself may…

Q: Apple Inc. Amazon Inc. Current Ratio 1.36 1.10 Debt to Equity Ratio 395.70% 262.95% Gross Profit…

A: Ratios are commonly used for quantitative analysis to check the financial performance and viability…

Q: Why would an analyst prepare a common-sized balance sheet?

A: Balance Sheet: It is one of the financial statements which shows the firm's liabilities, equity, and…

Q: A trend analysis indicates a firm's performance ____. a.over time b.more accurately than any…

A: A technical analysis methodology that aims to forecast future stock price movements using trend data…

Q: Which of the following provides the best description of the liquidity ratios? Current ratio is the…

A: Solution:- Liquidity ratio measures the liquidity of a firm, i.e. how efficiently a firm is able to…

Q: Which of the following is not likely to be used to measure a company's liquidity? a) Financial…

A: Ratios are the measures that are determined by the entity for the purpose of analyzing the position…

Q: (1) Why is it so important to be aware of extraordinaryitems when analyzing a company’s finances?…

A: Disclaimer: “Since you have asked multiple question, we will solve the first question for you. If…

Q: Investors and financial analysts wanting to evaluate the operation efficiency of a firm's managers…

A: Asset utilization ratios or asset management ratios are important for a company as it shows how…

Q: Which of the following is true about the quick ratio? It is a liquidity ratio. O It measures the…

A: The Acid-Test ratio, which is another name for the Quick Ratio, is a financial indicator that…

Q: Which of the following statements about the current ratio is FALSE? A. The higher the current…

A: Current ratio indicates the short-run liquidity position of the firm and is the ability of a firm to…

Q: equipment has a useful life of five years and a residual value of $75,000. Depreciati using the…

A: Accounting rate of return can be computed using the following formula : ARR=Average net…

Q: Which of the following statements is not true about the current ratio? A benchmark of 3.00 to 1.00…

A: According to the given question, we are required to find out the correct answer from the available…

Q: 2. High current and quick ratios indicate that a firm is managing its liquidity position well. * O…

A: Current ad quick ratio shows whether the company is able to generate adequate cash to pay off its…

Q: The tendency of the return on stockholders' equity to vary disproportionately from the return on…

A: The return on stockholders' equity refers to the amount given to the shareholders from the total…

Q: The most stringent measure of the liquidity status of a business firm. a. Current ratio b. Quick…

A: Current ratio is calculated by dividing the total current assets by the total current liabilities…

Q: Which type of financial ratio tells you how well a company can cover its long-term liabilities?

A: Financial ratios: Financial ratios are performance measurement methods used by the company to…

Q: 8 7 3. 2. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Year DPS : EPS=D CFPS= %3!…

A: Earnings per share are the overall earnings of the company incurred during the year and divided with…

Q: Which of the following is the correct explanation for the purpose of financial risk ratios? Select…

A: Financial risk ratios are debt-equity ratio, debt to capital ratio, interest coverage ratio etc.

Q: What does liquidity measure? Explain the trade-Off a firm faces between high-liquidity and…

A: Liquidity means availability of cash and cash equivalents (for example commercial paper, Treasury…

Q: A trend analysis indicates a firm's performance ____. a. at one given point in time b. over…

A: Trend analysis are used by analyst for various purpose.

Q: All the statements are incorrect regarding current ratio except? a. The more predictable a firm's…

A: Solution:- Current Ratio means the ratio of current assets to current liabilities of a firm. It…

Q: Which of these would best improve a firm's liquidity position? * a. Lower profitability b. Higher…

A: The following is a summary of the risk-return syndrome: When liquidity rises, the chance of…

Q: Calculate the firm’s Liquidity Ratios (Current Ratio and Quick Ratio), Profitability Ratios (for Net…

A: According to the question, we need to determine the financial ratios of a company. Financial…

Concept explainers

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.

Topic Video

Question

Having both current and quick ratios with values greater than 1.0 always indicates that the firm is managing its liquidity position well True or false

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Which of the following provides the best description of the liquidity ratios? Current ratio is the strictest test for a firm's liquidity position. If Firm A has higher values of all liquidity ratios than Firm B, and both firms are in the similar industry, then Firm A is managing its liquidity better than Firm B. The quick ratio regards inventory as part of the current assets because it's more liquid than other types of current assets. Cash ratio between 0 and 0.5 is considered a safe range for a firm's liquidity. 00
All the statements are incorrect regarding current ratio except? a. The more predictable a firm's cash flows, the higher the acceptable current ratio. b. A higher current ratio indicates a higher return on equity. c. The more predictable a firm's current ratio, the higher the clyrent liabilities. d. A higher current ratio indicates a greater degree of liquidity.
The most stringent measure of the liquidity status of a business firm. a. Current ratio b. Quick Ratio c. Cash Ratio d. Average collection period
A trend analysis indicates a firm's performance ____. a. at one given point in time b. over time c. without relying on financial ratios d. more accurately than any other type of analysis
Which of these would best improve a firm's liquidity position? *a. Lower profitabilityb. Higher capital spendingc. Higher need for noncash current assets on the balance sheetd. Declaration of stock dividends
Which of the following statements is not true about the current ratio? A benchmark of 3.00 to 1.00 is believed to be the ideal benchmark for the current ratio of a company. The current ratio measures an organization’s liquidity. The current ratio is found by dividing current assets by current liabilities. A current ratio below 1.00 to 1.00 signals the potential for financial difficulties.
A trend analysis indicates a firm's performance ____. a.over time b.more accurately than any other type of analysis c.at one given point in time d.without relying on financial ratios
What does liquidity measure? Explain the trade-Off a firm faces between high-liquidity and low-liquidity levels. Provide an example. Use your own words.
Identify two ratios to use to analyze a firm’s liquidity position, andwrite out their equations.
Which of the following is not likely to be used to measure a company's liquidity? a) Financial leverage b) Working capital c) Current ratio d) Acid-test (quick) ratio
Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: O a. They show the relative proportion of debt items with respect to shareholders' equity or total capital. b. They show the profitability of the company over a specific period of time. c. They show the probability of whether the company will face problems in operations. O d. They show the relative levels of liquid assets of the company.
Which of the following statements about the current ratio is FALSE? A. The higher the current ratio, the higher the level of cash must be for the firm. B. This ratio is a meaningful measure of liquidity because the book value of the assets and liabilities used in the calculation tend to deviate only slightly from market values. C. It will always be greater than the quick ratio in companies that carry inventory. D. This ratio is intended to indicate the short-run liquidity position of the firm. E. This ratio is calculated by dividing current assets by current liabilities.