Which of the following is the most commonly used liquidity ratio?
A) Return on equity
B) Return on sales
C) Current ratio
D) Quick ratio
E) They are all equally used.

Question

Quizplus · Accepted Answer

The current ratio is the most commonly used liquidity ratio as it provides a simple measure of a company's ability to pay off its short-term liabilities with its short-term assets. The quick ratio (D) is also a liquidity ratio, but it is less commonly used and provides a more stringent measure of a company's ability to pay off its short-term liabilities with only its most liquid assets. Return on equity (A) and return on sales (B) are profitability ratios, not liquidity ratios.

Which of the Following Is the Most Commonly Used Liquidity