If you have liquid assets of $20,000 and current liabilities of $10,000, then you
A) have a current liquidity ratio of 2.
B) are in poor financial shape with a liquidity ratio of 0.5.
C) may have trouble paying your bills depending on their due dates.
D) are over-extended by $10,000.

Question

Quizplus · Accepted Answer

The current liquidity ratio is calculated by dividing liquid assets by current liabilities. In this case, $20,000 / $10,000 = 2, indicating a current liquidity ratio of 2. This means you have twice as much in liquid assets as you owe in current liabilities, suggesting a strong liquidity position.

If You Have Liquid Assets of $20,000 and Current Liabilities