Which of the Following Statements Regarding Liquidity and Solvency Ratios

question 62

Multiple Choice

Which of the following statements regarding liquidity and solvency ratios is true?

• A)Unlike solvency ratios,liquidity ratios relate to the company's long-run survival.
• B)Both liquidity ratios and solvency ratios measure a company's ability to meet its financial obligations.
• C)Liquidity ratios include the return on equity ratio and the times interest earned ratio.
• D)Solvency ratios include the current ratio and the net profit margin ratio.

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Definitions:

Insurance

Protection against financial loss from specific risks, such as accident, theft, or illness, through the transfer of risk to an insurer for a premium.

Trade-In Allowance

The amount credited to the buyer by the seller when the buyer gives a product as part of the payment for a new product.

Book Value

The net value of a company's assets as recorded on its financial statements, minus its liabilities and intangible assets.

Recorded

The process of entering financial transactions into accounting records.