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A company has a liquidity ratio equal to 0.5. The directors believe that the company has to reduce it bank overdraft and have agreed to alter the company credit terms to customers from 2 months to 1 month?
What would be the effect on the company liquidity ratio if the change is effected
A. The liquidity ratio would decrease
B. The liquidity ratio would not change
C. The liquidity ratio would increase
D the liquidity ratio would increase initially but decrease after one monthMy answer was that it would increase
Your answer is correct (although again, why are you attempting a question for which you do not have an answer?).
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