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

question 198

Multiple Choice

What type of ratios best measure the short-term ability of the enterprise 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:

Accounts Payable

A bookkeeping record indicating a business's responsibility to settle a short-term financial liability with its lenders or vendors.

Marketable Securities

Financial instruments and assets that can be easily converted into cash, typically with a maturity of less than one year.

Warranty Expense

Costs that a company expects to incur under its product warranty promises, recognized as a liability at the time of sale.

Warranty Repairs

Services provided to fix or replace defective goods within a specified period as promised by a warranty agreement.