A retailer with a high interest cost due to high financial leverage needs to carefully evaluate its ________.
A) quick ratio
B) return on net worth
C) collection period
D) assets to net sales ratio

Question

Quizplus · Accepted Answer

The quick ratio measures a company's ability to meet short-term obligations with its quick assets, which are the most liquid assets that can be quickly converted to cash. A high interest cost due to high financial leverage indicates that the company may have difficulty meeting its debt obligations, so a strong quick ratio is important to ensure the company has enough cash or near-cash assets to cover its short-term obligations.

A Retailer with a High Interest Cost Due to High