What type of ratios measure the liquidity of specific assets and the efficiency of managing those assets?
A) Activity ratios.
B) Liquidity ratios.
C) Leverage ratios.
D) Profitability ratios.

Question

Quizplus · Accepted Answer

Activity ratios, also known as asset management ratios, measure the company's ability to manage its assets efficiently. This includes measuring the liquidity of specific assets such as inventory and accounts receivable, as well as measuring the efficiency of managing those assets by tracking turnover ratios. Liquidity ratios, on the other hand, measure a company's ability to meet short-term obligations using assets that can quickly be converted to cash. Leverage ratios measure a company's debt levels and its ability to meet its debt obligations. Profitability ratios measure the company's ability to generate profits from its operations. Therefore, activity ratios are the best choice to measure the liquidity of specific assets and the efficiency of managing those assets.

What Type of Ratios Measure the Liquidity of Specific Assets