The most recent data from the annual balance sheets of East India Inc. (EII) and Volition Corporation. are given.

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

	EII	Volition		EII	Volition
Assets			Liabilities & Equity
Current assets:			Current liabilities:
Cash	287	184.5	Accounts payable	0	0
Accounts receivable	105	67.5	Accruals	63.2813	0
Inventories	308	198	Notes payable	358.5938	337.5
Total current assets	700	450	Total current liabilities	421.875	337.5
Net fixed assets:			Long-term bonds	515.625	412.5
Net plant and equipment	550	550	Total debt	937.5	750
			Common equity
			Common stock	203.125	162.5
			Retained earnings	109.375	87.5
			Total common equity	312.5	250
Total assets	1,250	1000	Total liabilities and equity	1,250	1000

Volitions current ratio is and its quick ratio is , whereas EIIs current ratio is , and its quick ratio is .

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

East India Inc. (EII) has a better ability to meet its short-term liabilities than Volition Corporation.

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.

An increase in the quick ratio over time usually means that the companys liquidity position is improving.

As compared to Volition Corporation., East India Inc. (EII) 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 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 can be collected and converted into cash within the time period for which credit was granted

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