Seashell Company is considered "very liquid" for the year ended December 31,2012.This means that Seashell
A)has a small quick ratio.
B)must decrease its liquidity in order to appear favorable to stockholders.
C)should sell plant assets in order to remain in business.
D)is able to pay its current debts using its current assets.

Question

Quizplus · Accepted Answer

Being "very liquid" means that Seashell has enough current assets (cash, accounts receivable, inventory, etc.) to pay off its current liabilities (accounts payable, short-term loans, etc.). This indicates good financial health and the ability to handle short-term financial obligations. Therefore, option D is the correct choice. Option A is incorrect because a small quick ratio would indicate poor liquidity. Option B is incorrect because decreasing liquidity would not be favorable to stockholders. Option C is incorrect because selling plant assets would not necessarily improve liquidity and could harm the company's long-term viability.

Seashell Company Is Considered "Very Liquid" for the Year Ended