Most companies
A)use working capital and current and quick ratios as low-cost surrogates for cash flow measures.
B)place little importance on managing current assets.
C)have large amounts of current assets comprised of cash only.
D)are moving away from cash flow accounting.

Question

Quizplus · Accepted Answer

Working capital and current/quick ratios are commonly used as indicators of a company's ability to generate sufficient cash flow to meet short-term obligations. While they are not direct measures of cash flow, they are considered low-cost surrogates for this purpose. Current asset management is important for companies to ensure adequate liquidity, and having large amounts of current assets in cash only is not a common practice. Companies are not moving away from cash flow accounting, as it remains a critical aspect of financial analysis and reporting.

Most Companies