Seashell Company is considered "very liquid" for the year ended December 31,2017.This means that Seashell
A)has a small quick ratio.
B)must decrease its liquidity in order to appear favorable to stockholders.
C)should sell plant assets in order to remain in business.
D)is able to pay its current debts using its current assets.

Question

Quizplus · Accepted Answer

Being "very liquid" means that the company is able to pay its current debts using its current assets. This indicates that Seashell has sufficient cash or near-cash resources to cover its short-term obligations without the need to sell off fixed assets or raise additional funds. A small quick ratio (choice A) would indicate that the company has limited liquidity and may struggle to meet its immediate cash needs. Decreasing liquidity (choice B) would not be in the best interest of stockholders, who generally prefer companies with strong financial positions. Selling plant assets (choice C) may provide a short-term cash boost, but it would also reduce the company's long-term productive capacity and jeopardize its ability to generate sustainable revenue and profits.

Seashell Company Is Considered "Very Liquid" for the Year Ended