Asked by mallika persaud on May 30, 2024
Verified
Liquidity ratios concentrate on:
A) The operating cycle.
B) Profitability.
C) Short-term financial strength.
D) Ability to pay interest on loans.
Liquidity Ratios
Ratios that measure a company’s ability to meet its currently maturing obligations.
Operating Cycle
The average period of time required for a business to make an initial outlay of cash to produce goods or services, sell them, and receive cash back from customers.
- Understand the importance of liquidity ratios and their assessment of short-term financial strength.
Verified Answer
DM
David MoralesJun 03, 2024
Final Answer :
C
Explanation :
Liquidity ratios measure a company's ability to meet short-term obligations and focus on its short-term financial strength, such as the ability to pay off current debts and bills. The other options, such as operating cycle, profitability, and ability to pay interest on loans, are covered by other financial ratios.
Learning Objectives
- Understand the importance of liquidity ratios and their assessment of short-term financial strength.