Financial ratios that measure the ability of a firm to meet its short-term commitments are known as ………… ratios.

Question

BlackTom AI · Accepted Answer

The question asks about financial ratios that measure a firm’s ability to meet its short-term commitments.
Option 1: Activity ratios. These assess how efficiently a firm uses its assets to generate sales or how well assets are turned into revenue, not specifically about short-term liquidity. They focus on operational efficiency rather than immediate debt-paying capability.
Option 2: Solvency ratios. These evaluate long-term financial stability and the firm’s ability to meet long-term obligations, such as debt repayments over many years. They are concerned with long-term capital structure, not short-term liquidity.
Option 3: Profitability ratios. These measure a firm’s ability to generate profit relative to sales, assets, or equity. They tell us about earnings performance, not about the capacity to cover near-term liabilities.
Option 4: Liquidity ratios. These directly gauge whether a company can meet its short-term obligations with liquid assets, such as current assets relative to current liabilities. This category explicitly targets the firm’s ability to cover immediate debts and obligations.
In summary, identify the group of ratios that centers on short-term financial health and the ability to settle near-term bills, rather than efficiency, long-term solvency, or profitability concepts. The descriptions above align with those distinctions, clarifying why the liquidity-focused set is the appropriate match for short-term commitment coverage.

25400 Financial Literacy - Spring 2025 🔴 Practice Questions for In-class Quiz 2

Financial ratios that measure the ability of a firm to meet its short-term commitments are known as ………… ratios.

查看解析

登录即可查看完整答案

类似问题

Parsa's Organics currently has $56 in debt for every $100 in equity. If the company were to use some of its cash to purchase additional inventory, while maintaining its current equity and net income, which one of the following would decrease?

If a firm’s current ratio is increasing, it is likely that…

Financial ratios that measure the ability of a firm to meet its short-term commitments are known as ………… ratios.

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

GreenTech has a current ratio of 2.5, higher than the industry average of 1.8. What does this likely indicate about GreenTech relative to the industry average:

Even though Firm A's current ratio exceeds that of Firm B, Firm B's quick ratio might exceed that of A. However, if A's quick ratio exceeds B's, then we can be certain that A's current ratio is also larger than B's.

A firm's long term assets = $100,000, total assets = $400,000, inventory = $50,000 and current liabilities = $200,000. Compute the current ratio and the quick ratio

The two basic measures of liquidity are ROE and ROA.

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单