Which of the following statements about liquidity is true?
A) If a ﬁrm has a high degree of liquidity, it also faces a high degree of ﬁnancial distress.
B) At times, too little liquidity can result in lower proﬁts for a ﬁrm since there is often a trade- off between liquidity and proﬁtability.
C) You can get an accurate picture of the liquidity of a ﬁrm by looking at its current assets.
D) Accounts receivable are generally considered to be more liquid than cash.
E) An asset is liquid if it can be sold quickly regardless of price.

Question

Quizplus · Accepted Answer

The Answer of Which of the following statements about liquidity is true?
A) If a ﬁrm has a high degree of liquidity, it also faces a high degree of ﬁnancial distress.
B) At times, too little liquidity can result in lower proﬁts for a ﬁrm since there is often a trade- off between liquidity and proﬁtability.
C) You can get an accurate picture of the liquidity of a ﬁrm by looking at its current assets.
D) Accounts receivable are generally considered to be more liquid than cash.
E) An asset is liquid if it can be sold quickly regardless of price.

Which of the Following Statements About Liquidity Is True