Fred is the owner of a local feed store.Which one of the following ratios should he compute if he wants to know how long the store can pay its bills given the amount of cash the store currently has?
A)Current ratio
B)Debt ratio
C)Cash coverage ratio
D)Quick ratio
E)Cash ratio

Question

Quizplus · Accepted Answer

The ratio Fred should compute is the Cash Ratio. This ratio measures the amount of cash and cash equivalents a company has in relation to its current liabilities. It indicates the company's ability to pay its immediate bills with its available cash. This is the most specific ratio for Fred's question as it considers only cash, which is what he is interested in knowing about.

Fred Is the Owner of a Local Feed Store