Which of the following statements is CORRECT?
A) If a firm has high current and quick ratios,then it must be managing its liquidity position well.
B) If a firm sold some inventory for cash and left the funds in its bank account,then its current ratio would probably not change much,but its quick ratio would decline.
C) If a firm sold some inventory on credit,then its current ratio would probably not change much,but its quick ratio would decline.
D) If a firm sold some inventory on credit as opposed to cash,then there is no reason to think that either its current or quick ratio would change.
E) The inventory turnover ratio and days sales outstanding (DSO)are two ratios that are used to assess how effectively a firm is managing its current assets.

Question

Quizplus · Accepted Answer

The inventory turnover ratio measures how quickly a company sells its inventory, and days sales outstanding (DSO) measures how quickly a company collects its receivables. Both are indeed used to assess the effectiveness of a firm's management of its current assets.

Which of the Following Statements Is CORRECT