Which of the following would you use to assess a supplier’s liquidity?

Liquidity is a solvency measure which determines whether an organisation is able to pay its debt.

Which of the following would you use to assess a supplier’s liquidity? Select TWO.
A . current assets
B . current liabilities
C . long-term debt
D . shareholder’s equity

View Answer

Answer: A, B

Explanation:

The correct answer is current assets and current liabilities. There are many Questions about financial ratios on the exam.

If you’re unsure on them I suggest doing further reading outside of the study guide as this will help. I like this youtube video (I’m not associated with the makers of this video but think it’s a great way to explain liquidity) Liquidity ratios (youtube.com)

You can be asked to work out liquidity in the exam. If you are asked this, the numbers will be very simple to the point you may be able to do the sums in your head. There is also a calculator on the test app you can use.