Which of the following is an example of a liquidity ratio?
A) gross profit divided by net sales
B) profit divided by average assets
C) cost of sales divided by average inventory
D) current assets divided by current liabilities

Question

Quizplus · Accepted Answer

Liquidity ratios are used to measure a company's ability to pay its short-term obligations. Current ratio is one of the most common liquidity ratios and it is calculated by dividing current assets by current liabilities. Therefore, choice D is an example of a liquidity ratio.

A) Gross profit divided by net sales is an example of a profitability ratio.
B) Profit divided by average assets is an example of a return on investment ratio.
C) Cost of sales divided by average inventory is an example of an inventory turnover ratio.

Which of the Following Is an Example of a Liquidity