The most recent data from the annual balance sheets of Gaia Group and Oceanic Inc. are given.

Balance Sheet For the Year Ending on December 31 (Millions of dollars)

	Gaia	Oceanic		Gaia	Oceanic
Assets			Liabilities & Equity
Current assets:			Current liabilities:
Cash	1,722	1,107	Accounts payable	0	0
Accounts receivable	630	405	Accruals	379.6875	0
Inventories	1,848	1,188	Notes payable	2,151.5625	2,025
Total current assets	4,200	2,700	Total current liabilities	2,531.25	2,025
Net fixed assets:			Long-term bonds	3,093.75	2,475
Net plant and equipment	3,300	3,300	Total debt	5,625	4,500
			Common equity
			Common stock	1,218.75	975
			Retained earnings	656.25	525
			Total common equity	1,875	1,500
Total assets	7,500	6000	Total liabilities and equity	7,500	6000

Oceanics current ratio is and its quick ratio is , whereas Gaias current ratio is , and its quick ratio is .

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

Gaia Group has a better ability to meet its short-term liabilities than Oceanic Inc.

A current ratio of 1 indicates that the book value of the companys 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, it would mean that the company depends heavily on the sale of its inventory to meet its short-term obligations.

As compared to Oceanic Inc., Gaia Group has lesser liquidity and relatively greater reliance on outside cash flow to finance its short-term obligations.

An increase in the current ratio over time would always mean that the companys liquidity position is improving.

One of the most important assumptions behind the calculation of quick ratio is that:

The firms accounts receivables can be collected and converted into cash within the time period for which credit was granted

The firms inventories are highly liquid and can be sold quickly with minimal loss of value to assist in the settlement of the firms financial obligations

The firms accounts receivables will be collected late (after the expiration of the credit period) or are uncollectible