Tran Zhao has monetary assets valued at $17,500 and monthly expenses of $2,525.Using the liquidity ratio,how long could Tran live on his monetary assets if he were to lose his job?
A)Over 12 months
B)About 7 months
C)About 3 month
D)Less than 1 month

Question

Quizplus · Accepted Answer

The liquidity ratio is calculated by dividing monetary assets by monthly expenses.

Liquidity ratio = Monetary assets / Monthly expenses 
Liquidity ratio = 17,500 / 2,525 
Liquidity ratio = 6.93

This means Tran could live on his monetary assets for approximately 6.93 months. Since he cannot live for a fraction of a month, we round up to the nearest whole number, which is 7 months. Therefore, the best choice is B) About 7 months.

Tran Zhao Has Monetary Assets Valued at $17,500 and Monthly