Turnover ratios differ from the current and quick ratios in that they
A)are based on net sales instead of cash.
B)are based on a point in time rather than a period of time.
C)measure the efficiency with which a company uses its assets.
D)measure the profitability of a company instead of its liquidity.

Question

Quizplus · Accepted Answer

Turnover ratios, such as inventory turnover and accounts receivable turnover, measure the efficiency with which a company uses its assets to generate sales. In contrast, current and quick ratios measure a company's liquidity, or its ability to meet short-term obligations with its current assets. Turnover ratios are also typically calculated over a period of time, such as a year, whereas current and quick ratios are calculated at a specific point in time. Therefore, the best choice is C.

Turnover Ratios Differ from the Current and Quick Ratios in That