Liquidity measures a company's ability to pay its debts as they come due. It is not related to the amount of financial risk a company assumes or the size of the company. While liquidity can be affected by the ease of turning long-term assets into cash, this is not the primary definition of liquidity.

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Liquidity ________

Question 144

Multiple Choice

Liquidity ________.

A) represents the amount of financial risk a company assumes
B) measures how easily a company can turn its long-term assets into cash
C) measures how easily a company can pay its debts as they come due
D) is always higher for large companies than for small companies

Correct Answer: