Analysis of Financial Statements Liquidity Ratio

A liquid asset can be converted to cash quickly without significantly impacting the asset's value. Which of the following asset classes is generally considered to be the most liquid? OAccounts receivable Cash O Inventories The most recent data from the annual balance sheets of Free Spirit Industries Inc. and Scramouche Opera Company are as follows: Balance Sheet December 31st (Millions of dollars) Free Spirit Free Spirit Scramouche Scramouche Opera Industries Opera Industries Company Inc. Company Inc. Assets Liabilities Current assets Current liabilities Accounts payable Cash $861 $553 $0 $0 Accounts receivable Accruals 315 203 190 0 Notes payable Inventories 924 594 1,075 1,012 Total current assets 2,100 1,350 Total current liabilities 1,265 1,012 Net fixed assets Long-term bonds 1,547 1,238 Total debt Net plant and equipment 1,650 1,650 2,812 2,250 Common equity Common stock 610 488 Retained earnings 328 262 Total common equity 938 750 Total liabilities and equity Total assets 3,750 3,750 3,000 3,000 Free Spirit Industries Inc.'s quick ratio is and its current ratio is ;Scramouche Opera Company's quick ratio is and its current ratio is Which of the following statements are true? Check all that apply. Scramouche Opera Company has a better ability to meet its short-term liabilities than Free Spirit Industries Inc. 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. Compared to Free Spirit Industries Inc., Scramouche Opera Company has less liquidity and a lower reliance on outside cash flow to finance its short-term obligations. An increase in the current ratio over time always means that the company's liquidity position is improving