How does solvency differ from liquidity, Finance Basics

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How does solvency differ from liquidity

Question 1: How does solvency differ from liquidity?

Question 2: R. Davis Incorporated has a current ratio of 2.00. How would you interpret the current ratio for R. Davis Inc.?

Question 3: Describe the difference in the interpretation of the current and quick ratios.

Question 4: In what way does the cash conversion cycle affect liquidity?

Question 5: Describe how the CCC combines information from the balance sheet and income statement.

Question 6: Discuss the implications of a negative CCC.

Question 7: Discuss the weaknesses of the solvency measures described in this chapter.

Question 8: How would you describe the trend in the CCC for publicly traded firms?

Question 9: Identify the relationship between the CCC and 1) DIH, 2) DSO, and 3) DPO.

Question 10: If NWC is negative, then what does this imply about the current ratio?

Question 11: Is it possible for the quick ratio to exceed the current ratio?

Question 12: Andrieux Industries has a WCR of $10 million. Interpret this firm's WCR.

Question 13: How would you interpret a DCH of 90 days?

Question 14: Describe ways to increase the DCH.

Question 15: How would you interpret a NLB of -$400,000?

Question 16: What might decrease the NLB?

Question 17: How would you interpret a λ of 0.50?

Question 18: A firm currently has a λ of 1.80. Determine the effect of the following on λ (assuming all else constant): a. Decreased cash holdings b. A greater portion of the credit line is used c. Decreased average daily net cash flow d. Decreased standard deviation of daily net cash flow

Question 19: What would be required for λ to fall below 0.00?

Question 20: Discuss the trend in DCH

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