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? Inventories O Accounts receivable O Plant and equipment The most recent data from the annual balance sheets of Free Spirit Industries Corporation and LeBron Sports Equipment Corporation are as follows: Balance Sheet December 31st (Millions of dollars) Free Spirit LeBron Sports Equipment LeBron Sports Equipment Free Spirit Industries Industries Corporation Corporation Corporation Corporation Liabilities Assets Current assets Current liabilities Cash $1,435 $922 Accounts $0 $0 payable Cash $1,435 Accounts 525 receivable Inventories 1,540 Total current $3,500 assets Net fixed assets Net plant and 2,750 equipment Total assets $6,250 $922 338 990 $2,250 2,750 $5,000 Accounts payable Accruals Notes payable Total current liabilities Long-term bonds Total debt Common equity Common stock Retained earnings Total common equity Total liabilities and equity $0 316 1,793 $2,109 2,578 $4,687 $1,016 547 $1,563 $6,250 $0 0 1,687 $1,687 2,063 $3,750 $813 437 $1,250 $5,000 Total assets $6,250 Total liabilities $5,000 and equity Free Spirit Industries Corporation's current ratio is , and its quick ratio is ; LeBron Sports Equipment 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. Free Spirit Industries Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than LeBron Sports Equipment Corporation. A current ratio of 1 indicates that the book value of the company's current assets is equal to the book value of its current liabilities. 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. Free Spirit Industries Corporation has a better ability to meet its short-term liabilities than LeBron Sports Equipment Corporation. An increase in the current ratio over time always means that the company's liquidity position is improving. $5,000 $6,250