Question

A suplier who requires payment with in 10 days, should be most concerned with which one of the following ratios when granting credit?
a. Current Cash
b. Debt-equity
c. Quick

Answer 1

Answer: E) Cash

Explanation:

The Supplier should be most concerned with the Cash Ratio when granting credit. The Cash Ratio measures the amount of Cash in addition to the amount of Cash equivalent assets that the company has against it's current Liabilities in other to see if the company can be able to pay off it's Current Liabilities with it's current Cash and Cash Equivalents.

The Supplier will therefore be concerned with this ratio to see if the company is indeed able to pay back within 10 days before they can be able to grant credit.