Liquidity Ratio is defined as the:Question 10Answera.Minimum percentage amount of reserve in liquid assetsb.Maximum percentage amount of reserve in solid assetsc.Minimum percentage amount of reserve in solid assetsd.Maximum percentage amount of reserve in liquid assets
Question
Liquidity Ratio is defined as the:Question 10Answera.Minimum percentage amount of reserve in liquid assetsb.Maximum percentage amount of reserve in solid assetsc.Minimum percentage amount of reserve in solid assetsd.Maximum percentage amount of reserve in liquid assets
Solution
Liquidity Ratio is defined as the:
a. Minimum percentage amount of reserve in liquid assets
This means that the liquidity ratio is a measure of a company's ability to pay off its short-term debts as they are due using the company's liquid assets. These liquid assets are assets that can be easily converted into cash. The higher the liquidity ratio, the greater the company's liquidity or ability to meet short-term obligations.
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