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Questions and Answers
Which financial ratio measures a company's ability to pay off short-term debts using its current or liquid assets?
Which financial ratio measures a company's ability to pay off short-term debts using its current or liquid assets?
- Liquidity ratio (correct)
- Leverage ratio
- Activity ratio
- Profitability ratio
What does a higher leverage ratio indicate about a company's financial position and risk level?
What does a higher leverage ratio indicate about a company's financial position and risk level?
- Lower efficiency and value creation for shareholders
- Lower risk of financial distress
- Higher efficiency and value creation for shareholders
- Higher risk of default or bankruptcy (correct)
What does the current ratio measure?
What does the current ratio measure?
- How well a company can generate income relative to its revenue, costs, assets, or equity
- How efficiently a company is using its assets to generate revenues and cash
- The liquidity of the firm's inventory
- The firm's ability to meet its current obligations with the most liquid of its current assets (correct)
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