Question

Which of the following is not usually considered a measure of an entity's liquidity?

1) Current ratio
2) Acid-test ratio
3) Cash ratio
4) Working capital

Answer 1

Working capital is not usually considered a measure of an entity's liquidity.

Step-by-step explanation:

The measure of liquidity refers to how quickly an entity can use a financial asset to buy a good or service. The current ratio, acid-test ratio, and cash ratio are all commonly used measures of liquidity. However, working capital is not usually considered a direct measure of an entity's liquidity. Working capital is the difference between current assets and current liabilities and provides an indication of an entity's ability to meet its short-term financial obligations.