What Type of Ratios Best Measure the Short-Term Ability of the Company

question 16

Multiple Choice

What type of ratios best measure the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash?

• A) Leverage
• B) Solvency
• C) Profitability
• D) Liquidity

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Definitions:

Convexity

The curvature of the price–yield relationship of a bond.

Yield

The annual percentage yield received from an investment, including interest or dividends, relative to the cost of that investment.

Rate Anticipation Swap

A switch made between bonds of different durations in response to forecasts of interest rates.

Portfolio Duration

A measure of the sensitivity of a portfolio's value to changes in interest rates, often used for managing the interest rate risk.