Which of the following ratios are measures of a firm's liquidity?
I.fixed asset turnover ratio
II.current ratio
III.debt-equity ratio
IV.acid test
A) I and III only
B) II and IV only
C) III and IV only
D) I,II,and III only
E) I,III,and IV only

Question

Quizplus · Accepted Answer

The current ratio and acid test (also known as quick ratio) are both measures of a firm's liquidity. The current ratio is a measure of a company's ability to meet short-term debt obligations, while the acid test measures a company's ability to pay off current liabilities without relying on the sale of inventory.

The fixed asset turnover ratio and debt-equity ratio are not measures of liquidity. The fixed asset turnover ratio is a measure of a company's efficiency in using its fixed assets to generate sales, while the debt-equity ratio measures a company's financial leverage.

Which of the Following Ratios Are Measures of a Firm's