2. Liquidity ratios

A liquid asset can be converted to cash quickly without significantly impacting the assets value.

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

The most recent data from the annual balance sheets of N&B Equipment Company and Scramouche Opera Company are as follows:

Accounts receivable Inventories O Cash N&B Equipment Company Assets Current assets Cash Balance Sheet December 31st (Millions of dollars) Scramouche Opera N&B Equipment Scramouche Opera Company Company Company Liabilities Current liabilities $861 $553 Accounts $0 payable 315 203 Accruals 190 SO Accounts 0 924 594 1,075 1,012 $2,100 $1,350 $1,265 $1,012 receivable Inventories Total current assets Net fixed assets Net plant and equipment Notes payable Total current liabilities Long-term bonds Total debt 1,547 1,238 1,650 1,650 $2,812 $2,250 $610 $488 328 262 Common equity Common stock Retained earnings Total common equity Total liabilities and equity $938 $750 Total assets $3,750 $3,000 $3,750 $3,000 and its current ratio is ; Scramouche Opera Company's quick ratio is N&B Equipment Company's quick ratio is and its current ratio is Which of the following statements are true? Check all that apply. N&B Equipment Company has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than Scramouche Opera Company. 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. An increase in the quick ratio over time usually means that the company's liquidity position is improving and that the company is managing its short-term assets well. N&B Equipment Company has a better ability to meet its short-term liabilities than Scramouche Opera Company. An increase in the current ratio over time always means that the company's liquidity position is improving. and its current ratio is ; Scramouche Opera Company's quick ratio is N&B Equipment Company's quick ratio is and its current ratio is 1.1205 Which of the following statements are try 0.8964 all that apply. N&B Equipment Company has 0.7470 lity but also a greater reliance on outside cash flow to finance its short-term obligations than Scramouche Opera Company. 0.9296 O 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. An increase in the quick ratio over time usually means that the company's liquidity position is improving and that the company is managing its short-term assets well. N&B Equipment Company has a better ability to meet its short-term liabilities than Scramouche Opera Company. An increase in the current ratio over time always means that the company's liquidity position is improving. and its current ratio is ; Scramouche Opera Company's quick ratio is N&B Equipment Company's quick ratio is and its current ratio is 2.8340 Which of the following statements are true? Check all that apply. 2.5340 N&B Equipment Company has less liquidity but also a greater relian 1.8340 de cash flow to finance its short-term obligations than Scramouche Opera Company. 1.3340 O 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. An increase in the quick ratio over time usually means that the company's liquidity position is improving and that the company is managing its short-term assets well. N&B Equipment Company has a better ability to meet its short-term liabilities than Scramouche Opera Company. An increase in the current ratio over time always means that the company's liquidity position is improving. and its current ratio is ; Scramouche Opera Company's quick ratio is N&B Equipment Company's quick ratio is and its current ratio is 0.9296 he following statements are true? Check all that apply. 1.1155 N&B Equipment Company has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than 1.3944 Scramouche Opera Company. 0.7470 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. An increase in the quick ratio over time usually means that the company's liquidity position is improving and that the company is managing its short-term assets well. N&B Equipment Company has a better ability to meet its short-term liabilities than Scramouche Opera Company. An increase in the current ratio over time always means that the company's liquidity position is improving. and its current ratio is ; Scramouche Opera Company's quick ratio is N&B Equipment Company's quick ratio is and its current ratio is Which of the following statements are 2.1601 eck all that apply. 1.6601 N&B Equipment Company h uidity but also a greater reliance on outside cash flow to finance its short-term obligations than Scramouche Opera Compan 3.1601 A current ratio of 1 indicate 2.8601 book value of the company's current assets is equal to the book value of its current liabilities. An increase in the quick ratio over time usually means that the company's liquidity position is improving and that the company is managing its short-term assets well. N&B Equipment Company has a better ability to meet its short-term liabilities than Scramouche Opera Company. An increase in the current ratio over time always means that the company's liquidity position is improving