Answered: Even though Firm A's current ratio…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Even though Firm A's current ratio exceeds that of Firm B, Firm B's quick ratio might exceed that of A. However, it A's quick ratio exceeds B's, then we can be certain that A's current ratio is also larger than Bs.

a. True

b. False

Although a full liquidity analysis requires the use of a cash budget, the current and quick ratios provide fast and easy- to-use estimates of a firm's liquidity position.

a. True

b. False

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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