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16 October, 22:20

Which of the following would, generally, indicate an improvement in a company's financial position, holding other things constant?

a. The TIE declines.

b. The DSO increases.

c. The quick ratio increases.

d. The current ratio declines.

e. The total assets turnover decreases.

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  1. 16 October, 22:47
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    c. The quick ratio increases.

    Explanation:

    The quick ratio is also known as the acid test ratio. It a measure of a company's ability to settle its current liabilities are they mature. The quick ratio is, therefore, a liquidity ratio. It indicates a firm's ability to generate currents assets needed to pay the current liability. A liquid firm is financially healthy as it can generate sufficient cash and cash equivalents to meet its obligations.

    The quick ratio is obtained by dividing quick assets by current liabilities. A quick ratio of 1 or more is preferred. An increase in quick ratio indicates that the company's assets are increasing more than its liabilities.
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