Creditors would prefer
1)a quick ratio of 1.2 to a quick ratio of 0.8
2)a quick ratio of 0.8 to a quick ratio of 1.2
3)an average collection period of 46 to an average collection period of 35
4)an average collection period of 35 to an average collection period of 46
A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4

Question

Quizplus · Accepted Answer

Creditors prefer a higher quick ratio (1.2 over 0.8) as it indicates better short-term liquidity. They also prefer a shorter average collection period (35 over 46) as it indicates quicker collection of receivables.

Creditors Would Prefer 1)a Quick Ratio of 1.2 to a Quick Ratio of Quick