Which One of the Following Ratios Would Not Likely Be

question 19

Multiple Choice

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

• A) Current ratio
• B) Inventory turnover
• C) Asset turnover
• D) Accounts receivable turnover

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Definitions:

Short-Run Liquidity

The ability of a company to meet its short-term financial obligations and operate in the near future without facing financial distress.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business.

Deferred Revenues

Deferred revenues refer to money received by a business for goods or services yet to be delivered or performed, recorded as a liability on the balance sheet until the obligation is fulfilled.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of a business.