Which of the following statements concerning the cash flow ratio is true?
A) The cash flow ratio is a better measure of liquidity than the current ratio because it is calculated using cash flow generated over a whole reporting period rather than the current assets at a point in time.
B) The cash flow ratio is used to assess liquidity.
C) The cash flow ratio compares the cash flow from operating activities with the current liabilities.
D) All of the above statements are true.

Question

Quizplus · Accepted Answer

All the statements provided about the cash flow ratio are true. It is indeed considered a better measure of liquidity than the current ratio because it assesses cash flow over a period rather than just current assets at a specific point in time. It is used to assess liquidity by comparing the cash flow from operating activities to current liabilities, providing a more dynamic view of a company's ability to cover its short-term obligations.

Which of the Following Statements Concerning the Cash Flow Ratio