All of the Following Are True Regarding Financial Statement Analysis

question 8

Multiple Choice

All of the following are true regarding financial statement analysis ratios associated with liabilities except

• A)a high times interest earned ratio indicates that a company is more likely to meet interest payments as scheduled.
• B)high liquidity ratios mean that lines of credit should be high to compensate.
• C)if a company's current ratio is lower than the industry average, then it may lack liquidity.
• D)unrecorded obligations causing sizeable differences between liquidity and solvency ratios can be ignored.

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Definitions:

Price Elasticity

A measure of how the quantity demanded of a good is affected by a change in its price.

Inelastic

A characteristic of demand when consumers' purchase quantities are not significantly affected by changes in the price of a good or service.

Good Substitutes

Products or services that can be used in place of one another, satisfying the same needs or wants of the consumer.

Elastic

Describes demand or supply that is highly sensitive to changes in price; a small change in price leads to a large change in the quantity demanded or supplied.