What are two common measures of liquidity?

Question

Quizplus · Accepted Answer

The current ratio and quick ratio are two commonly used measures of liquidity. The current ratio measures a company's ability to pay off its current liabilities with its current assets, while the quick ratio is a more conservative measure that only includes quick assets (cash, marketable securities, and accounts receivable) in the calculation. Both ratios are important indicators of a company's short-term financial health and ability to meet its obligations. Option A is incorrect as inventory turnover ratio measures the speed at which a company sells and replaces its inventory, whereas the cash ratio measures how much of a company's current assets are in cash or cash equivalents. Option B is incorrect as receivables turnover ratio and payables turnover ratio are measures of how quickly a company collects payments from customers and pays its suppliers, respectively. Option D is incorrect as the cash conversion rate is a measure of how efficiently a company converts its inventory and other assets into cash.

What Are Two Common Measures of Liquidity