If a firm has pledged its receivables and its inventory,then the best indicator of its short-term liquidity may be indicated by:
A)working capital.
B)current ratio.
C)acid-test.
D)cash ratio.
E)days' sales in receivables.

Question

Quizplus · Accepted Answer

Since the firm has pledged both its receivables and inventory, it means that these assets are not available for use as collateral for any additional financing. This could lead to a potential liquidity issue if the firm experiences any unforeseen financial difficulties. Therefore, the best indicator of short-term liquidity would be the cash ratio, which measures the firm's ability to pay off current liabilities with its most liquid assets, i.e. cash and cash equivalents.

If a Firm Has Pledged Its Receivables and Its Inventory,then