CFA Practice Question

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CFA Practice Question

______ is considered to be a liquidity ratio.

I. The return on assets
II. The fixed asset turnover
III. The cash ratio
IV. The times interest earned ratio
V. The profit margin
Correct Answer: III only

User Contributed Comments 7

User Comment
morpheus918 What about IV? They can't be too liquid if their times interest earned ratio is in the crapper!
tony1973 Not IV as it is a financial risk ratio.
Shelton How about II?
CFAnext fixed assets dont tell muchs about liquidity of a firm.

e.g. if fixed assest ratio is high, i.e. high return per fixed asset, it would help us judge how "liquid" the asset is!
nagri CFAnext, you cannot judge about their liquidity, from fixed assets turnover ratio, you can judge about their efficiency in generating the sales.
reganbaha Can't use fixed asset ratio as a measure of short term liquidity. Many a company has gone into administration with a lot of valuable fixed assets. Hence the term; asset rich, cash poor.
johntan1979 Liquidity ratios:
Current ratio
Quick or Acid test ratio
Cash ratio

That's it and that's all folks!
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