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Which of the following statements are true?

a. Pellegrini Southern Corporation has less liquidity but also a greater reliance on outside cash flow to finance its short-term obligations than Jing Foodstuffs Corporation.
b. If a company’s current liabilities are increasing faster than its current assets, the company’s liquidity position is weakening.
c. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations.
d. Pellegrini Southern Corporation has a better ability to meet its short-term liabilities than Jing Foodstuffs Corporation.
e. An increase in the current ratio over time always means that the company’s liquidity position is improving.

Respuesta :

jepessoa

Answer:

b. If a company’s current liabilities are increasing faster than its current assets, the company’s liquidity position is weakening. TRUE

higher liabilities respect to current assets, decrease the company's ability to meet its short term payments

c. If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is large, then the company depends heavily on the sale of its inventory to meet its short-term obligations. TRUE

the current ratio = current assets / current liabilities

the quick ratio = (current assets - inventory) / current liabilities

the difference between both shows the dependence on selling inventory to pay off debts.

e. An increase in the current ratio over time always means that the company’s liquidity position is improving. TRUE

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