A Liquidity Ratio Measures the

question 55

Multiple Choice

A liquidity ratio measures the

• A)profit or operating success of a company over a period of time.
• B)ability of a company to survive over a long period of time.
• C)short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.
• D)percentage of total financing provided by creditors.

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Definitions:

Net Capital Spending

The total expenditure on fixed assets less any sales of fixed assets during a given period, often used in assessing a company's investment in physical assets.

Earnings Before Interest And Taxes

A financial performance measure that calculates a company's profitability by excluding interest and taxes expenses.

Marginal Tax Rate

The rate of additional federal income tax to be paid on an additional dollar of income, which varies depending on income levels and filing status.

Taxable Income

The amount of an individual's or a company's income used to determine how much tax is owed to the government in a given tax year.