Net working capital
-Net working capital
is a measure of a firm’s overall liquidity.
is defined as total assets minus current liabilities.
reflects decreasing firm solvency as it increases
all of the above
-Why is the quick ratio a more appropriate measure of liquidity than the current ratio for a large-airplane manufacturer?
It recognizes the contribution of all assets so that analysts can see how “quickly” a firm can satisfy its short-term obligations.
It excludes inventory from the numerator of the ratio because it is difficult to convert inventory to cash and most sales are made on a credit basis.
It recognizes that parts can be quickly converted to cash.
It is not more appropriate. The current ratio would provide better information in this situation.
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