LIQUIDITY RATIOS

Question 1

Working Capital

Answer 1

CA - CL

measures solvency

Question 2

Current Ratio

Answer 2

CA
______
CL

measures ST debt paying ability

Question 3

Quick Assets Ratio

Answer 3

QA (CRM)
_______
CL

measures immediate ST liquidity

Question 4

Current Cash Debt Coverage Ratio

Answer 4

Net Cash Provided by Operating Activities
________________________________
Average CL

measures ability to pay off its CL in a given year

Question 5

Receivables Turnover

Answer 5

Net Credit Sales
______________________
Average Trade Receivables

measures liquidity of receivables

Question 6

Inventory Turnover

Answer 6

Cost of Goods Sold
_______________
Average Inventory

measures liquidity of inventory

Question 7

Asset Turnover

Answer 7

Net Sales
___________
Average TA

measures how efficiently assets are used to generate sales

Question 8

of days supply in ave inventory

Answer 8

360
________________
Inventory Turnover

or

Average Ending Inventory
____________________
Average Daily COGS

measures no. of days required to sell inventory

Question 9

of days sales in average receivables

Answer 9

360
____________________
Receivables Turnover

measures no. of days required to collect receivables