Basic Finance for Managers

Question 3 1.5 pts The current ratio and inventory turnover ratios both help us measure the firm's liquidity. The current ratio measures the relationship of a firm's current assets to its current liabilities, while the inventory turnover ratio gives us an indication of how long it takes the firm to convert its inventory into cash. C True False 1.5 pts Question 4 Although a full liquidity analysis requires the use of a cash budget, the current and quick ratios provide fast and easy-to-use measures of a firm's liquidity position. True C False 1.5 pts Question 5 High current and quick ratios always indicate that a firm is managing its liquidity position well. C True C False