Get the answers you need at Westonci.ca, where our expert community is dedicated to providing you with accurate information. Get immediate and reliable solutions to your questions from a community of experienced experts on our Q&A platform. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately.

Which of the following is not a correct way of calculating a liquidity ratio?
A- Current Ratio = Total Assets / Total Current Liabilities
B- Liquidity Ratio = Liquid Assets / Short-term Liabilities
C- Operating Cash Flow = Current Liabilities / Operating Cash Flow
D- Quick Ratio = (Current Assets - Inventories - Prepayments) / Current Liabilities


Sagot :

Option C -Operating Cash Flow = Current Liabilities / Operating Cash Flow s not a correct way of calculating a liquidity ratio.

Liquidity ratios are a measure of a company's ability to settle its short-term payments. A company has the ability to quickly exchange its revenues and is using them to pay his obligations is dictated by its liquidity ratios. The potential to pay back debts and keep engaged on installments is simpler the better the ratio. Since this can vary by industry, and current ratio of 1.0 usually signals that a group's debt do not exceeding its liquid assets. In enterprises in which there is a quicker product changeover and/or shorter payment cycles, ratings below 1.0 may be acceptable.

Absolute liquidity ratio =(Cash + Marketable Securities)÷ Current Liability.

Learn more about Liquidity ratios here:

https://brainly.com/question/15395374

#SPJ4

Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. Stay curious and keep coming back to Westonci.ca for answers to all your burning questions.