Which of the following statements regarding liquidity ratios is false?
A)A high current ratio generally indicates the ability to pay current liabilities on a timely basis.
B)A high acid-test ratio generally indicates the ability to pay current liabilities on a timely basis.
C)All current assets are due within one year and therefore have essentially equal liquidity.
D)As a rule of thumb,a current ratio of 1 or higher often reflects an acceptable level of liquidity.

Question

Quizplus · Accepted Answer

Not all current assets have equal liquidity as some may take longer to convert to cash than others. For example, inventory may take longer to sell than accounts receivable.

Which of the Following Statements Regarding Liquidity Ratios Is False