Question

Blue Moose Home Builders’s quick ratio is ____, and its current ratio is _____; Blue Hamster Manufacturing Inc.’s quick ratio is _____, and its current ratio is _____ .
Which of the following statements are true? Check all that apply.

Blue Hamster Manufacturing Inc. has a better ability to meet its short-term liabilities than Blue Moose Home Builders

If a company’s current liabilities are increasing faster than its current assets, the company’s liquidity position is weakening.

If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations.

Compared to Blue Moose Home Builders, Blue Hamster Manufacturing Inc. has less liquidity and a relatively greater reliance on outside cash flow to finance its short-term obligations.

An increase in the current ratio over time always means that the company’s liquidity position is improving.

Answer 1

Answer:

Blue Moose Home Builders’s quick ratio is _0.7___, and its current ratio is 1.3_____; Blue Hamster Manufacturing Inc.’s quick ratio is _1.7____, and its current ratio is __0.9___ .

Explanation:

It is true that Blue Hamster Manufacturing Inc. has a better ability to meet its short-term liabilities has it has higher current and quick ratios.

Is also true that if a company's current liabilities are increasing faster than its current assets,the company's liquidity position is weakening as if finds harder to settle short term obligations.

If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations.This is also true.

Compared to Blue Moose Home Builders, Blue Hamster Manufacturing Inc. has less liquidity and a relatively greater reliance on outside cash flow to finance its short-term obligations.This is also correct.

An increase in the current ratio over time always means that the company’s liquidity position is improving.This does not necessarily guarantee improvement as the increase in current assets might be due to increase in obsolete inventory items that are worthless