The Financial Ratios That Measure a Firm's Ability to Pay

question 280

Multiple Choice

The financial ratios that measure a firm's ability to pay its short-term debts are called

• A) leverage ratios.
• B) liquidity ratios.
• C) equity ratios.
• D) profitability ratios.

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Definitions:

GDP

Stands for Gross Domestic Product, a measure of the economic performance of a country, representing the total value of all goods and services produced over a specific time period.

Marginal Tax Rates

The rate at which tax is charged on the last dollar of income earned, indicating the percentage of additional income that will be taxed.

Monetarism

An economic theory that emphasizes the role of governments in controlling the amount of money in circulation as a primary method for stabilizing the economy and controlling inflation.

Rational Expectations Theory

An economic theory that suggests individuals use all available information and make decisions based on their rational outlook, expectations, and available resources.