Test Bank Ratio Analysis.VERIFIED

True-False Easy: Ratio analysis Answer: a Diff: E 1. Ratio analysis involves a comparison of the relationships between financial statement accounts so as to analyze the financial position and strength of a firm. a. True b. False Liquidity ratios Answer: b Diff: E 2. The current ratio and inventory turnover ratio measure the liquidity of a firm. The current ratio measures the relationship of a firm's current assets to its current liabilities and the inventory turnover ratio measures how rapidly a firm turns its inventory back into a "quick" asset or cash. a. True b. False Current ratio Answer: b Diff: E 3. If a firm has high current and quick ratios, this is always a good indication that a firm is managing its liquidity position well. a. True b. False Asset management ratios Answer: a Diff: E