Which of the following is an example of liquidity analysis?
A)Total liabilities are divided by total assets.
B)Net income is divided by average total assets.
C)Net income is divided by the average number of common shares outstanding.
D)Quick assets are divided by current liabilities.

Question

Quizplus · Accepted Answer

Liquidity analysis involves evaluating a company's ability to meet its short-term obligations. One commonly used liquidity ratio is the quick ratio, which measures the company's ability to pay off its current liabilities using its most liquid assets. The quick assets are defined as current assets minus inventory and are divided by current liabilities in this ratio. Therefore, D is the correct answer.

Which of the Following Is an Example of Liquidity Analysis