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.

Question

Quizplus · Accepted Answer

This statement is false as not all current assets have the same level of liquidity. For example, cash is the most liquid, while inventory may take longer to convert into cash and therefore may not be as liquid.

Which of the Following Statements Regarding Liquidity Ratios Is False