20. A manufacturing firm will most likely have the heaviest investment in which type of assets? a. Cash b. Inventory c. Accounts receivable d. Investments e. Plant, property, and equipment 21. A retailing firm has which type of inventory? a. Raw materials b. Work in process c. Merchandise d. Raw materials and merchandise e. Raw materials, work in process, and merchandise 22. Liquidity ratios can be used: a. to measure the degree of protection of long-term suppliers of funds. b. to measure borrowing capacity. c. to measure the earning ability of a firm. d. to measure the firm's ability to meet its current obligations. e. to measure the worth of the firm. 23. Company A uses LIFO and Company B uses FIFO for inventory valuation. Otherwise, the firms are of similar size and have the same revenue and expense. Assume inflation. In analyzing liquidity and profitability of the two firms, which of the following will hold true? a. It is impossible to compare two firms with different inventory methods. b. Company B will have relatively higher profit and higher inventory turnover. c. Company B will have relatively higher profit and lower inventory turnover. d. Company A will have a higher current ratio and acid test ratio, with the same profit. e. Company B will have relatively higher profit and a higher current ratio. a. 24. Which of the following would best indicate that the firm is carrying excess inventory? A decline in sales b. A decline in the current ratio c. A decline in days' sales in inventory d. A stable current ratio with declining quick ratios e. A rise in total asset turnover 25. Typically, which of the following would be considered to be the most indicative of a firm's short-term debt paying ability? a. Working capital b. Current ratio c. Acid test d. Cash ratio e. Days' sales in receivables