Market Liquidity Assignment | Homework For You

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.

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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. Get Finance homework help today