Liquidity activity ratios are useless to auditors in determining how quickly an entity can convert current assets into cash.

Question

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Liquidity activity ratios (such as current ratio and quick ratio) are commonly used by auditors to assess an entity's ability to pay its short-term obligations, including the speed at which it can convert current assets into cash. Therefore, liquidity activity ratios are not useless to auditors in determining a company's liquidity position.

Liquidity Activity Ratios Are Useless to Auditors in Determining How