Company A has a current ratio of 1.20 while company B has a current ratio of 5.60.

a. Which company is more liquid? Why?

b. Which company is more efficient? Why?

c. Which company, most likely, has a lot of idle assets? Why?

Company A has a current ratio of 1.50 and an acid-test ratio of 0.20 while company B has a current ratio of 1.50 and an acid-test ratio of 1.00.

a. Which company is more liquid? Why?

b. What explains the huge difference in the acid-test ratio between the two companies, given that the current ratio is identical?

c. Which company would have a harder time fulfilling its short-term obligations? Why?