$2.$ Liquidity ratios

A liquid asset can be converted quickly to cash with little sacrifice in its value.

Which of the following asset classes is generally considered to be the least liquid?

Treasury bills

Real estate

Money market instruments

The most recent data from the annual balance sheets of Pellegrini Southern Corporation and Jing Foodstuffs Corporation are as follows:

Balance Sheet December $31$st

$($Millions of dollars$)$

Jing Foodstuffs Corporation Pellegrini Southern Corporation Jing Foodstuffs Corporation Pellegrini Southern Corporation

Assets Liabilities

Current assets Current liabilities

Cash $$574$ $$369$ Accounts payable $$0$ $$0$

Accounts receivable $210135$ Accruals $1270$

Inventories $616396$ Notes payable $717675$

Total current assets $$1,400$ $$900$ Total current liabilities $$844$ $$675$

Net fixed assets Long$-$term bonds $1,031825$

Net plant and equipment $1,1001,100$ Total debt $$1,875$ $$1,500$

Common equity

Common stock $$406$ $$325$

Retained earnings $219175$

Total common equity $$625$ $$500$

Total assets $$2,500$ $$2,000$ Total liabilities and equity $$2,500$ $$2,000$

Pellegrini Southern Corporation$$s current ratio is $,$ and its quick ratio is ; Jing Foodstuffs Corporation$$s current ratio is $,$ and its quick ratio is $.$ Note: Round your values to four decimal places.

Which of the following statements are true? Check all that apply.

Pellegrini Southern Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short$-$term obligations than Jing Foodstuffs Corporation.

If a company$$s current liabilities are increasing faster than its current assets, the company$$s liquidity position is weakening.

If a company has a quick ratio of less than $1$ but a current ratio of more than $1$ and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short$-$term obligations.

Pellegrini Southern Corporation has a better ability to meet its short$-$term liabilities than Jing Foodstuffs Corporation.

An increase in the current ratio over time always means that the company$$s liquidity position is improving.