Multiple choice

Under the liquidity approach

  1. the most liquid assets are presented at the bottom of the balance sheet

  2. the least urgent payments are presented at the top of the balance sheet

  3. the most urgent payments are presented at the bottom of the balance sheet

  4. the least liquid assets are presented at the top of the balance sheet
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The liquidity approach presents assets in order of decreasing liquidity - most liquid at the bottom (cash), least liquid at the top (fixed assets like land and buildings). This ordering helps assess a company's ability to meet short-term obligations quickly. Option D correctly states this principle.

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