The best way to get a comprehensive picture of a firm's liquidity position is to examine its ____,which forecasts cash inflows and outflows.
A) cash and marketable securities
B) net working capital
C) current ratio
D) cash budget

Question

Quizplus · Accepted Answer

The best way to get a comprehensive picture of a firm's liquidity position is to examine its cash budget, which forecasts cash inflows and outflows. This budget takes into account all of the cash transactions that are expected to occur during a specific period of time, typically a month or a quarter. By analyzing the cash budget, a firm can determine its expected cash position at the end of the period, and can take steps to manage its liquidity accordingly. Choices A, B, and C are all important measures of liquidity, but they do not provide as comprehensive a picture of a firm's liquidity position as a cash budget.

The Best Way to Get a Comprehensive Picture of a Firm's