The accounts receivable turnover and inventory turnover ratios are used to analyze
A) long-term debt-paying ability.
B) profitability.
C) leverage.
D) liquidity.

Question

Quizplus · Accepted Answer

The accounts receivable turnover and inventory turnover ratios both relate to how quickly a company can convert its assets into cash. Accounts receivable turnover measures how many times a company can collect its average accounts receivable balance within a given period, while inventory turnover measures how many times a company sells and replaces its inventory within a given period.
Both ratios are used to analyze a company's liquidity, or its ability to meet its short-term obligations. A high turnover ratio indicates that a company is able to convert its assets into cash quickly, which is a good indicator of liquidity. Therefore, the best choice is D - liquidity.

The Accounts Receivable Turnover and Inventory Turnover Ratios Are Used