True or False Questions 1. A lower current ratio suggests a strong liquidity position. 2.The acid...

True or False Questions

1. A lower current ratio suggests a strong liquidity position.

2.The acid test ratio is very much like the current ratio except that its denominator excludes inventories and prepaid expenses.

3.The accounts receivable turnover ratio measures how many times a company converts its receivables into cash each year.

4.The inventory turnover ratio measures the number of times merchandise is sold and replaced during the year.

Expert Solution

1. A lower current ratio suggests a strong liquidity position.

False. Because lower current ratio means the current assets are lower when compared with current liabilities which in turn means the company doesn't have strong liquidity

2.The acid test ratio is very much like the current ratio except that its denominator excludes inventories and prepaid expenses.

False. in Acid ratio inventories and prepaid expenses are deducted from the numerator and not on denominator

3.The accounts receivable turnover ratio measures how many times a company converts its receivables into cash each year.

True. Accounts receivable turnover ratio helps to analyze how effectively the firm is collecting the receivables from customers

4.The inventory turnover ratio measures the number of times merchandise is sold and replaced during the year.

True. Inventory turnover ratio shows how many times a company has sold and replaced inventory during a given period

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jeff jeffy answered 1 year ago

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