The liquidity position of a company is analyzed using its _____.
A) times-interest-earned ratio
B) inventory turnover ratio
C) dividend yield ratio
D) debt-to-equity ratio

Question

Quizplus · Accepted Answer

The liquidity position of a company refers to its ability to meet short-term obligations as they become due. The inventory turnover ratio measures how quickly inventory is sold and replenished, providing insight into the company's ability to convert inventory into cash. Therefore, option B, the inventory turnover ratio, is the best choice for analyzing a company's liquidity position. The times-interest-earned ratio measures a company's ability to meet interest payments on its debt, the dividend yield ratio measures the dividend return on an investment, and the debt-to-equity ratio measures a company's leverage and financial risk.

The Liquidity Position of a Company Is Analyzed Using Its