Which of the following ratios would be useful in assessing short-term liquidity?
A) Current ratio, inventory turnover, fixed asset turnover.
B) Quick ratio, average collection period, cash conversion cycle.
C) Average collection period, debt ratio, return on assets.
D) Current ratio, cash interest coverage, cash-flow liquidity ratio.

Question

Quizplus · Accepted Answer

The quick ratio, average collection period, and cash conversion cycle are all ratios that specifically measure short-term liquidity. The quick ratio (also known as the acid test ratio) measures a company's ability to meet short-term obligations with its most liquid assets. The average collection period measures how long it takes a company to collect its accounts receivables, which is a key component of short-term cash flow. The cash conversion cycle is the number of days it takes for a company to convert its inventory into cash. These ratios provide insight into how efficiently a company is managing its short-term assets and obligations.

Which of the Following Ratios Would Be Useful in Assessing