Question 6.KC.2: The quality of Best Buy’s liquidity has ________ over the fi...
The quality of Best Buy’s liquidity has ________ over the five-year period.
a. Deteriorated.
b. Improved slightly.
c. Improved considerably.
d. Not changed.
a. Correct. The ratios of receivable and inventory to working capital have both increased. An increase in these ratios implies a worsening of the quality of liquidity.
b. Incorrect. This statement cannot be correct because these two ratios have increased, and they are the measures of the quality of liquidity. Quality decreases when these two ratios decrease.
c. Incorrect. This statement cannot be correct because these two ratios have increased, and they are the measures of the quality of liquidity. Quality decreases when these two ratios decrease.
d. Incorrect. The company’s liquidity has changed.