Question
Why is the quick ratio a more appropriate measure of liquidity than the current ratio for a large-airplane manufacturer? It recognizes the contribution of all
Why is the quick ratio a more appropriate measure of liquidity than the current ratio for a large-airplane manufacturer?
It recognizes the contribution of all assets so that analysts can see how "quickly" a firm can satisfy its short-term obligations. | ||
It recognizes that parts can be quickly converted to cash. | ||
It provides a better measure of overall liquidity when a firm has highly liquid inventory. | ||
It is not more appropriate. The current ratio would provide better information in this situation. | ||
It excludes inventory from the numerator of the ratio because it is difficult to convert inventory to cash and most sales are made on a credit basis. |
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