Which statement best describes a firm's liquidity?
A) It is often measured by a ratio of current assets to current liabilities.
B) It is not important to a company's life.
C) It is the ability of the firm to sell its products quickly.
D) It is a measurement of spontaneous financing.

Question

Quizplus · Accepted Answer

Liquidity refers to a company's ability to meet its short-term financial obligations. The best way to measure liquidity is by using a ratio of current assets to current liabilities. A high ratio indicates a company has enough current assets to meet its current liabilities, which is an indication of good liquidity.

Which Statement Best Describes a Firm's Liquidity