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

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

	EII	Oceanic		EII	Oceanic
Assets			Liabilities & Equity
Current assets:			Current liabilities:
Cash	3,157	2,029.5	Accounts payable	0	0
Accounts receivable	1,155	742.5	Accruals	696.0937	0
Inventories	3,388	2,178	Notes payable	3,944.5312	3,712.5
Total current assets	7,700	4,950	Total current liabilities	4,640.625	3,712.5
Net fixed assets:			Long-term bonds	5,671.875	4,537.5
Net plant and equipment	6,050	6,050	Total debt	10,312.5	8,250
			Common equity
			Common stock	2,234.375	1,787.5
			Retained earnings	1,203.125	962.5
			Total common equity	3,437.5	2,750
Total assets	13,750	11000	Total liabilities and equity	13,750	11000

Oceanics 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 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., 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 accounts receivables will be collected late (after the expiration of the credit period) or are uncollectible

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