Practicing Success
Which of the following is measure of liquidity of a concern? |
Inventory turnover and Current ratio Current ratio and Quick ratio Gross Profit ratio and Operating ratio Current ratio and Average Collection period |
Current ratio and Quick ratio |
Liquidity ratios are calculated to measure the short-term solvency of the business, i.e. the firm’s ability to meet its current obligations. These are analysed by looking at the amounts of current assets and current liabilities in the balance sheet. The two ratios included in this category are current ratio and liquidity ratio. |