Liquidity analysis is required
A)in order to evaluate the profitability over past accounting periods.
B)to assess the nearness to cash of a company's assets and liabilities.
C)to be reported in the financial statements for all companies publicly traded.
D)when a company reports nonrecurring items in its financial statements.

Question

Quizplus · Accepted Answer

Liquidity analysis is done to assess the nearness to cash of a company's assets and liabilities, i.e. its ability to meet short-term obligations. It is important for decision-making related to managing cash, working capital, and short-term investments. It is not directly related to evaluating profitability over past accounting periods, reporting in financial statements, or when companies report nonrecurring items.

Liquidity Analysis Is Required