New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    A company's current ratio is 2.5, but its quick ratio is

    only 0.9. What does this suggest about its liquidity?
    A Adequate cash reserves Correct Answer Incorrect Answer
    B Excessive receivables Correct Answer Incorrect Answer
    C High inventory holding Correct Answer Incorrect Answer
    D Insolvency risk Correct Answer Incorrect Answer

    Solution

    The significant gap between current and quick ratio indicates heavy reliance on inventory, which is less liquid.

    Practice Next