Question

Which of the following is true of liquidity? Select one: a. Liquidity metrics include debt ratio, times interest earned, and ratio of liabilities to stockholders' equity. b. Liquidity metrics include assets turnover, price-earnings ratio, and dividend yield. c. Liquidity is the ability to convert assets to cash. d. Liquidity is the ability of a company to generate net income related to its invested assets.

Answer 1

Answer:

c. Liquidity is the ability to convert assets to cash.

Explanation:

The company's level of liquidity deals with the company's level of cash which is usually held to meet current obligations.

The liquidity ratios are ratios that indicate how well and quickly a company can convert current assets into cash for the settlement of current liabilities.

Examples of liquidity ratios include current ratio, acid test/quick ratio , cash ratio and working capital ratio.