Question

15. Company A has a cash ratio of 0.25 and Company B has a cash ratio of 0.72. Also, company A's stock is traded at an average daily volume of 100 million shares and with a bid-ask spread of 1 cent. Company B's stock is traded at an average daily volume of 5 million shares and with a bid-ask spread of 5 cents. Which of the following is most likely to be true? A) Company A is stock is more liquid than company B's. B) Company B's market liquidity is higher than company A's. C) Company A has greater short-term solvency therefore more liquid. D) Company A's stock has relative higher transaction cost, E) Company A can increase its market liquidity by holding more liquid assets. 16. Disbursements float: A) occurs when a deposit is recorded but the funds are unavailable. B) causes the book balance to exceed the bank balance. C) has tended to decrease the net float of the firm D) is a recommended source of funds for short-term investments. E) is generally more desirable to companies than collection float.

Answer 1

1. Option A is correct Answer because the company A stock trading volume is 100 million which is higher than Company B which make Company A's Stock more liquidity than Company's B stock.

2. Option A Occurs when a deposit is recorded but the funds are not available. Disbursement Float is a situation where a person or a company spent or deposited money but the same has not been reflected in its bank account (It happens in case of Checks issued)