Which of the following statements regarding liquidity ratios is true? Question 3

ID: 2468781 • Letter: W

Question

Which of the following statements regarding liquidity ratios is true?

Question 35 options:

A low acid-test ratio generally indicates the abiltiy to pay current liabilities on a timely basis.

All current assets are due within one year and therefore have essentially equal liquidity.

A high working capital generally indicates the ability to pay current liabilities on a timely basis.

A low current ratio generally indicates the ability to pay current liabilities on a timely basis.

A low acid-test ratio generally indicates the abiltiy to pay current liabilities on a timely basis.

All current assets are due within one year and therefore have essentially equal liquidity.

A high working capital generally indicates the ability to pay current liabilities on a timely basis.

A low current ratio generally indicates the ability to pay current liabilities on a timely basis.

Working Capital = Current Assets - Current Liabilities

Therefore the corret statement is

"A high working capital generally indicates the ability to pay current liabilities on a timely basis"

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