Which of the statements below is FALSE?
A)The acid ratio test equals current assets minus inventories divided by current liabilities.
B)Examples of liquidity ratios include the current ratio,the cash coverage ratio,and the quick ratio.
C)The current ratio is current assets divided by current liabilities.
D)Inventory turnover equals cost of goods sold divided by inventory.

Question

Quizplus · Accepted Answer

The cash coverage ratio is not a liquidity ratio; it is a measure of a company's ability to cover its debt obligations with its cash flow, making it more related to solvency than liquidity. Liquidity ratios, such as the current ratio and quick ratio, measure a company's ability to meet short-term obligations.

Which of the Statements Below Is FALSE