The Two Categories of Ratios That Should Be Utilized to Assess

question 63

Multiple Choice

The two categories of ratios that should be utilized to assess a firm's true liquidity are the

• A) liquidity and profitability ratios.
• B) liquidity and debt ratios.
• C) current and quick ratios.
• D) liquidity and activity ratios.

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Definitions:

Expected Return

The anticipated amount of profit or loss an investment is likely to generate over a specific period.

Risk-Free Asset

A risk-free asset refers to an investment that theoretically provides a certain return with no risk of financial loss.

Risky Asset

An asset that has a significant degree of uncertainty in its returns, often leading to higher potential rewards and higher potential losses.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the individual data points differ from the mean.