32.1: Liquidity and Activity ratios

Question 1

Liquidity ratios include?

Answer 1

Current ratio;

Quick ratio;

Cash ratio.

Question 2

Current ratio is?

Answer 2

Current ration = current assets / current liabilities

Question 3

Quick ratio is?

Answer 3

Quick ratio = (cash + short-term marketable instr. + receivables) / current liabilities

Question 4

Cash ratio is?

Answer 4

Cash ratio = (cash + short-term marketable instr.) / current liabilities

Question 5

Activity ratios include?

Answer 5

Accounts receivable turnover;

Inventory turnover;

Number of days sales outstanding;

Days inventory outstanding;

Days payable outstanding;

Cash conversion cycle.

Question 6

Accounts receivable turnover ratio is?

Answer 6

Accounts receivable turnover = credit sales / avg. receivables

Question 7

Inventory turnover ratio is?

Answer 7

Inventory turnover = COGS / avg. inventory

Question 8

Number of days sales outstanding ratio is?

Answer 8

Number of days outstanding = avg. accounts receivable / (COGS/365)

Question 9

Days inventory outstanding ratio is?

Answer 9

Days inventory outstanding = avg. inventory / (COGS/365)

Question 10

Days payable outstanding ratio is?

Answer 10

Days payable outstanding = avg. acc.payable / (purchases/365)

Question 11

Cash conversion cycle CCC ratio is?

Answer 11

CCC = Days of inventory + Days of receivables - Days of payables