_______ ratios measure the ability of an organization to pay its short-term debts.

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BlackTom AI · Accepted Answer

The question asks: '_______ ratios measure the ability of an organization to pay its short-term debts.'

Option 1: Activity. Activity ratios assess how efficiently a company uses its assets to generate revenue or how well it manages its operations (for example, asset turnover). They do not specifically measure short-term debt-paying ability, so this is not correct.

Option 2: Inventory turnover. This is a specific activity ratio that measures how quickly inventory is sold and replaced over a period. While it relates to operational efficiency, it does not directly quantify a company’s capacity to meet short-term obligations, so it is not the right choice.

Option 3: Profit. Profit is a measure of earnings and profitability, not a direct gauge of liquidity or the ability to satisfy short-term debts. Therefore, this option is incorrect in the context of paying short-term obligations.

Option 4: Liquidity. Liquidity ratios directly measure short-term financial health and the ability to pay current liabilities with current or near-cash assets. Examples include the current ratio and the quick ratio, which assess whether the firm can cover its short-term debts as they come due. This is the correct category for the described concept.

Option 5: Leverage. Leverage ratios assess the degree to which a company uses debt to finance its assets and operations, focusing on long-term solvency rather than immediate short-term liquidity. Thus, they do not answer the question about paying short-term debts.

In summary, the term that best fits the description of measuring the ability to pay short-term debts is liquidity, because it focuses on how readily a firm can meet its current obligations using its near-cash and current assets.

MGS203008.2025FA POM TEST #2 Chapters 7,8,10,11,12- Requires Respondus LockDown Browser

_______ ratios measure the ability of an organization to pay its short-term debts.

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类似问题

At the end of 2012, Delaney Company had a current ratio of 1.87, a quick ratio of 1.31, and working capital of $45,000. Its current assets consisted of cash, accounts receivable, and merchandise inventory. Calculate the amount of Delaney's current liabilities (rounded to 0 decimals):

If a firm buys inventories with cash, the quick ratio decreases, but the current ratio remains constant

What do liquidity ratios measure?

Which of the following actions would NOT affect the quick / liquid ratio of a firm?

Which statement is not correct?

Which of the following is not a measure of short-term liquidity?

The current ratio is a measure of:

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MGS*2030*08.2025FA POM TEST #2 Chapters 7,8,10,11,12- Requires Respondus LockDown Browser

_______ ratios measure the ability of an organization to pay its short-term debts.

查看解析

登录即可查看完整答案

类似问题

At the end of 2012, Delaney Company had a current ratio of 1.87, a quick ratio of 1.31, and working capital of $45,000. Its current assets consisted of cash, accounts receivable, and merchandise inventory. Calculate the amount of Delaney's current liabilities (rounded to 0 decimals):

If a firm buys inventories with cash, the quick ratio decreases, but the current ratio remains constant

What do liquidity ratios measure?

Which of the following actions would NOT affect the quick / liquid ratio of a firm?

Which statement is not correct?

Which of the following is not a measure of short-term liquidity?

The current ratio is a measure of:

更多留学生实用工具

希望你的学习变得更简单

MGS203008.2025FA POM TEST #2 Chapters 7,8,10,11,12- Requires Respondus LockDown Browser