"Inventory to net working capital" is an example of a(n)
A) leverage ratio.
B) liquidity ratio.
C) activity ratio.
D) asset management ratio.
E) profitability ratio.

Question

Quizplus · Accepted Answer

Inventory to net working capital is a liquidity ratio that measures a company's ability to pay off its short-term debts using its current assets. Specifically, the ratio compares the value of a company's inventory to its net working capital (which is calculated by subtracting current liabilities from current assets). A higher inventory to net working capital ratio suggests that a company may have difficulty meeting its short-term obligations, while a lower ratio suggests that it has more than enough liquidity to cover them.

"Inventory to Net Working Capital" Is an Example of A(n)