Selected data from the financial statements are provided below:
Refer to Rainsoft Company

-Refer to Rainsoft Company. Which of the following statements is true regarding the company's liquidity?
A)Based on the current ratio and operating cash flow ratio, the company appears to be in a worse position to pay its current obligations at the end of 2015 compared to 2014.
B)The quick ratio decreased from 2014 to 2015.
C)The operating cash flow ratio increased from 2014 to 2015.
D)Based on the quick ratio and cash ratio, the company appears to be in a better position to pay its current obligations at the end of 2015 compared to 2014.

Question

Selected data from the financial statements are provided below:
Refer to Rainsoft Company
 
-Refer to Rainsoft Company. Which of the following statements is true regarding the company's liquidity?
A)Based on the current ratio and operating cash flow ratio, the company appears to be in a worse position to pay its current obligations at the end of 2015 compared to 2014. 
B)The quick ratio decreased from 2014 to 2015. 
C)The operating cash flow ratio increased from 2014 to 2015. 
D)Based on the quick ratio and cash ratio, the company appears to be in a better position to pay its current obligations at the end of 2015 compared to 2014.

Quizplus · Accepted Answer

The quick ratio and cash ratio both increased from 2014 to 2015, indicating that the company has better liquidity and is in a better position to pay its current obligations. The current ratio and operating cash flow ratio both decreased from 2014 to 2015, indicating that the company may have difficulty paying its current obligations. However, the question specifically asks about liquidity, and the quick ratio and cash ratio are better indicators of short-term liquidity.

Selected Data from the Financial Statements Are Provided Below