Seashell Company is considered "very liquid" for the year ended December 31, 2016.This means that Seashell
A) has a small quick ratio.
B) must decrease its liquidity in order to appear favorable to stockholders.
C) should sell plant assets in order to remain in business.
D) is able to pay its current debts using its current assets.

Question

Quizplus · Accepted Answer

Being "very liquid" means that Seashell is able to pay off its current debts using its current assets, indicating a high level of liquidity. Option A is incorrect because a small quick ratio indicates a lower level of liquidity. Option B is incorrect because decreasing liquidity would not appear favorable to stockholders. Option C is incorrect because selling plant assets may not necessarily improve liquidity and may negatively impact the ability of the company to generate revenue.

Seashell Company Is Considered "Very Liquid" for the Year Ended