Liquidity ratio-existing short-term debt obligations

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Reference no: EM131593106

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 Liquidity ratio

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?

a. Josh's liquidity ratio is ____.? (Round to two decimal places.)

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? (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.

Reference no: EM131593106

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