What is the financial situation if Joe has a liquidity ratio of 2 and a current ratio of 1.5?
Question 15Select one:
a.
He regularly saves 1.5% of his discretionary income
b.
He can pay short-term bills for a 2 month period from liquid assets
c.
His liabilities are 1.5 times the level of his assets
d.
He has 2 times the level of liquid assets as current liabilities
b. He can pay short-term bills for a 2-month period from liquid assets
The liquidity ratio of 2 indicates that Joe's liquid assets are twice as high as his current liabilities, while the current ratio of 1.5 indicates that he can cover his current liabilities with his current assets. This means that Joe can pay his short-term bills for a 2-month period from his liquid assets.