Liquidity ratios can be obtained from information on the Balance Sheet,while Activity Ratios require information obtained from the
A)income statement,balance sheet and statement of cash flows.
B)income statement only.
C)income statement and balance sheet.
D)balance sheet only.
E)none of the above

Question

Quizplus · Accepted Answer

Liquidity ratios, such as the current ratio and quick ratio, are calculated using information from the balance sheet, which provides information about a company's short-term assets and liabilities. On the other hand, activity ratios, such as inventory turnover and accounts receivable turnover, require information from both the income statement and balance sheet to calculate how efficiently a company is using its assets to generate revenue. Therefore, option C, which includes both the income statement and balance sheet, is the best choice.

Liquidity Ratios Can Be Obtained from Information on the Balance