Which of the following ratios gives an idea of the liquidity of a firm?
Answer Details
The ratio that gives an idea of the liquidity of a firm is the Quick ratio. The quick ratio, also known as the acid-test ratio, measures a company's ability to pay off its current liabilities with its quick assets, which are assets that can be easily converted to cash. Quick ratio provides a more conservative measure of liquidity compared to other liquidity ratios like the current ratio, which includes all current assets. A higher quick ratio indicates that a company has enough quick assets to cover its current liabilities and can quickly pay off its obligations. Therefore, option B (Quick ratio) is the correct answer.