Liquidity is the ability
A)to increase net assets through regular operations.
B)to generate cash from sources other than regular operations.
C)to convert existing assets into cash.
D)of financial statement users to predict a company's cash flows.

Question

Quizplus · Accepted Answer

Liquidity refers to the ability of a company to convert its existing assets into cash quickly without causing significant loss in their value. Thus, option C is the correct answer. Options A and B refer to methods of generating cash, while option D pertains to predicting cash flows, which are not the same as liquidity.

Liquidity Is the Ability