Which one of the following statements concerning liquidity is correct?
A)Fixed assets are more liquid than current assets.
B)Balance sheet accounts are listed in order of decreasing liquidity.
C)Liquid assets tend to be highly profitable.
D)The less liquidity a firm has,the lower the probability the firm will encounter financial difficulties.
E)Trademarks and patents are highly liquid.

Question

Quizplus · Accepted Answer

Balance sheet accounts are typically listed in order of decreasing liquidity, meaning that current assets (such as cash and inventory) are listed before fixed assets (such as property and equipment) which are less liquid.

Answer: D
 The less liquidity a firm has, the higher the probability that the firm will encounter financial difficulties as it may not be able to meet its short-term obligations.

Therefore, options A, C, and E are incorrect.

Which One of the Following Statements Concerning Liquidity Is Correct