The liquidity of a firm is
A) measured by a ratio of current assets to current liabilities.
B) not important to the company's financial health.
C) the ability of the firm to sell its products quickly.
D) a measurement of spontaneous financing.

Question

Quizplus · Accepted Answer

The liquidity of a firm refers to its ability to meet short-term obligations. This is measured by calculating the ratio of current assets to current liabilities. A higher ratio indicates better liquidity, as the company has more cash and assets readily available to pay off its debts. Therefore, the correct answer is A.

The Liquidity of a Firm Is