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3 years ago

A firm’s liquidity level decreases when:_______.

Business

1 answer:

katovenus [111]3 years ago

5 0

Answer:

b) inventory is sold on credit.

Explanation:

Liquidity is defined as the a business to use its current assets to settle it's current liabilities.

This is calculated by using the working capital ratio.

Working capital ratio = Current assets ÷ Current liabilities.

Cash and inventory contribute to a business' liquidity.

When inventory is sold on credit, it does not result in immediate increase in cash as payment is in the future. So there is a reduction in the current asset of the company.

A reduction in the numerator of the working capital ratio results in lower value of the ratio (lower liquidity)

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3 years ago

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OLga [1]

$273 ,000 being the equal installments for all the three years

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3 years ago

Imagine that the Brazilian aircraft manufacturer Embraer purchases a 10 percent share of a Canadian aircraft distribution compan

otez555 [7]

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