Which of the Following Is a Difference Between Liquidity Ratios

question 85

Multiple Choice

Which of the following is a difference between liquidity ratios and leverage ratios?

• A) Liquidity ratios measure how effectively a firm uses its assets to generate revenue, whereas leverage ratios compare the amount of profit to some measure of resources invested.
• B) Liquidity ratios compare the amount of profit to some measure of resources invested, whereas leverage ratios measure how effectively a firm uses its assets to generate revenue.
• C) Liquidity ratios measure a firm's ability to pay its short-term liabilities as they come due, whereas leverage ratios measure the extent to which a firm relies on debt to meet its financing needs.
• D) Liquidity ratios measure the net income per share of common stock outstanding, whereas leverage ratios indicate the earnings per dollar by the owners of a company.

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Definitions:

Proxy

An authority to act on behalf of another person in voting or making decisions.

Directors

Individuals appointed or elected to the board of a corporation who are responsible for overseeing and guiding the company's policies and decisions.

Directors

Individuals elected by shareholders to manage the corporation's affairs and make decision on major company issues.

Voting Trust

A legal arrangement where shareholders' voting rights are transferred to a trustee, typically to consolidate control over a company for a specific period.