Ratios That Measure the Short-Term Ability of the Company to Pay

question 81

Multiple Choice

Ratios that measure the short-term ability of the company to pay its maturing obligations are

• A) liquidity ratios.
• B) profitability ratios.
• C) solvency ratios.
• D) trend ratios.

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Definitions:

Estimated Economic Life

The expected period over which an asset is considered to be useful and contribute to the earnings of a business, affecting its depreciation or amortization.

Capital Lease

A lease agreement in which the lessee essentially acquires the ownership rights of the leased asset, also referred to as a finance lease.

Residual Value

The estimated salvage value or the worth of an asset at the end of its useful life.

Lease Payments

Regular payments made by a lessee to a lessor for the use of an asset over a specified period.