Ratios help measure:

Question

BlackTom AI · Accepted Answer

Reading the question, we’re asked which list accurately reflects the aspects that ratios measure in financial analysis.
Option 1: 'Professionalism, liquidity and cashflow' includes 'professionalism,' which is not a standard financial ratio category, and it omits important areas like market performance and efficiency. This makes it an incomplete and misleading set.
Option 2: '' (an empty string) provides no information to evaluate, so it cannot be a correct choice; a legitimate answer should specify measurable categories, not be blank.
Option 3: 'Liquidity, profitability, Effectiveness, Debt' contains 'Liquidity' and 'Profitability,' which are valid categories, and 'Debt' is relevant, but it uses 'Effectiveness' instead of the commonly used 'Market performance' or 'Efficiency' and it omits one key area (Market performance) found in standard ratio analysis. This makes it incomplete or imprecise.
Option 4: 'Liquidity, profitability, Debt, Efficiency, Market performance' lists five core domains commonly recognized in ratio analysis: liquidity (ability to meet short-term obligations), profitability (earnings performance), debt (leverage measures), efficiency (operational effectiveness), and market performance (how the firm’s activities translate into market-based evaluations). This combination aligns with standard practice and covers a comprehensive set of ratio groups.
Overall, the most comprehensive and accurate grouping is the one in Option 4, which includes all the main areas typically assessed by ratios. The other options either introduce nonstandard terms, omit key categories, or are blank, making them incorrect.

VPAB13H3 F LEC01 Final Exam Quiz

Ratios help measure:

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