Creditors would prefer
1. a quick ratio of 1.2 to a quick ratio of 0.8
2. a quick ratio of 0.8 to a quick ratio of 1.2
3. days sales outstanding of 46 to a days sales outstanding of 35
4. days sales outstanding of 35 to a days sales outstanding of 46
A)1 and 3
B)1 and 4
C)2 and 3
D)2 and 4

Question

Quizplus · Accepted Answer

Creditors prefer a higher quick ratio because it indicates a company's ability to meet short-term obligations with its most liquid assets, making 1.2 more favorable than 0.8. They also prefer a lower days sales outstanding (DSO) because it means the company collects its receivables more quickly, making 35 days more favorable than 46 days.

Creditors Would Prefer 1. a Quick Ratio of 1.2 to a Quick Ratio