Question: Liquidity ratio Josh Smith has compiled some of his personal financial data in order to determine his liquidity position. The data are as follows:
|
Account
|
Amount
|
|
Cash
|
$ $3,150
|
|
Marketable securities
|
1,040
|
|
Checking account
|
850
|
|
Credit card payables
|
1,260
|
|
?Short-term notes payable
|
1130
|
a. Calculate Josh's liquidity ratio.
b. Several of Josh's friends have told him that they have liquidity ratios of about 1.5. How would you analyze Josh's liquidity relative to his friends?
i. Josh's liquidity ratio is ____. (Round to two decimal? places.)
ii. Several of Josh's friends have told him that they have liquidity ratios of about 1.5.
How would you analyze Josh's liquidity relative to his? friends? (Select all the answers that apply.)
A. Josh's ratio indicates that he is in a relatively inferior position to satisfy his existing short-term debt obligations as they come due.
B. Josh's ratio indicates that he is in a relatively better position to satisfy his future short-term debt obligations as they come due.
C. Since Josh's liquidity ratio exceeds 1.5, Josh has more liquidity than his friends.
D. Since Josh's liquidity ratio exceeds 1.5, Josh has less liquidity than his friends.