The correct answer is: A. Pure ratio form.
Liquidity ratios are financial metrics that measure a company’s ability to meet its short-term obligations. They are expressed as a pure ratio, which means that they do not include any units of measurement. This makes them easy to compare across different companies and industries.
The most common liquidity ratios are the current ratio and the quick ratio. The current ratio is calculated by dividing a company’s current assets by its current liabilities. The quick ratio is calculated by dividing a company’s cash and cash equivalents, short-term investments, and accounts receivable by its current liabilities.
Liquidity ratios are important because they can help investors and creditors assess a company’s financial health. A high current ratio or quick ratio indicates that a company is able to meet its short-term obligations. A low current ratio or quick ratio, on the other hand, indicates that a company may have difficulty meeting its short-term obligations.
Here is a brief explanation of each option:
- A. Pure ratio form: Liquidity ratios are expressed as a pure ratio, which means that they do not include any units of measurement. This makes them easy to compare across different companies and industries.
- B. Percentage: Liquidity ratios could be expressed as a percentage, but this is not the most common way to express them.
- C. Rate or time: Liquidity ratios are not expressed as a rate or time.
- D. None of the above: This option is not correct.