Asked by Rohan Anand on Jun 22, 2024
Verified
Which type of financial ratio measures whether a firm is able to meet its current financial obligations?
A) activity ratio
B) liquidity ratio
C) dividend ratio
D) profitability ratio
Liquidity Ratio
A financial measure used to determine a company's ability to cover its short-term obligations with its most liquid assets.
Financial Obligations
Commitments to pay money to another party, including debts, salaries, taxes, and other liabilities.
- Learn about the various financial ratios and their specific purposes.
Verified Answer
SO
Sophie OlivarezJun 24, 2024
Final Answer :
B
Explanation :
Liquidity ratios measure a firm's ability to meet its current financial obligations. These ratios focus on a company's short-term assets and liabilities, such as cash, inventory, accounts payable, and current debt. Examples of liquidity ratios include the current ratio, quick ratio, and cash ratio. Activity ratios measure a firm's efficiency in managing its assets, dividend ratios measure the amount of dividends paid out to shareholders, and profitability ratios measure a firm's ability to generate profits in relation to its revenue, assets, or equity.
Learning Objectives
- Learn about the various financial ratios and their specific purposes.
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