final exam- liquidity ratios

Question 1

current ratio definition

Answer 1

ability to pay bills as they fall due

Question 2

current ratio equation

Answer 2

current assets/current liabilities

Question 3

quick ratio definition

Answer 3

excluding inventory

Question 4

quick ratio equation

Answer 4

current assets - inventory/current liabilities

Question 5

inventory days definition

Answer 5

average time taken to sell inventory

Question 6

inventory days equation

Answer 6

inventory x 365/CoS

Question 7

receivable days definition

Answer 7

average time taken to collect receivables. company wants to collect cash as promptly as possible without annoying customers

Question 8

receivable days equation

Answer 8

trade receivables x365/sales revenue

Question 9

payable days definition

Answer 9

average time taken to pay suppliers. company wants to collect cash as promptly as possible as possible without annoying suppliers

Question 10

payable days equation

Answer 10

trade payables x365/CoS